Walgreens could ‘aggressively’ cut costs if privately owned, analyst says

If Walgreens Boots Alliance Inc. Bought by private equity firm Sycamore Partners, it will have greater flexibility to “aggressively” reduce costs to address the industry’s current challenges, according to an industry analyst.

“As a private company, in our view, WBA (Walgreens Boots Alliance) will have greater flexibility to make major changes to the business, and respond to recent challenges with declining pharmacy operating margins and increased online retail product sales. “We have to cut costs aggressively to deal with the competition,” said CFRA research analyst Paige Meyer.

Mayer maintained his “hold” opinion on the shares, which are down about 60% year to date.

Why are neighborhood pharmacies closing?

The company is in talks to sell itself to a private equity firm and the deal is expected to be signed early next year, sources familiar with the matter told Reuters. However, Walgreens, which has been working with its advisers for the past few weeks, has also reached out to other potential buyers, sources told Reuters.

Walgreens declined to comment. Fox Business contacted Sycamore Partners.

The reported talks come as the company was already working to improve its operations under new leadership Profitability challenges and declining margins.

In October, the company, which is battling competition from rivals such as Amazon, announced plans to close at least 1,200 stores over the next three years. The move is part of its effort to close a “significant” number of underperforming locations across the US in response to these challenges.

Walgreens must pay $106.8 million for claims it billed the government for prescriptions that were never dispensed

Walgreens previously told FOX Business that its retail pharmacy business is central to its business strategy going forward, but that “increased regulatory and reimbursement pressures are impacting our ability to cover costs associated with rent, staffing and supply needs.” Are.”

George Hill, managing director and senior equity research analyst at Deutsche Bank, anticipates more closures in the industry as it works to right-size itself.

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Hill previously told Fox Business that the entire “industry It seemed like the footprints were moving And locations were expanding much faster than the need for pharmacies.”

There are about 60,000 retail pharmacies in the U.S. Hill said the industry may decide it needs to be closer to 35,000 or 40,000.