Walgreens swings to loss on $2 billion Boots UK charges due to COVID-19

(Reuters) - Walgreens Boots Alliance Inc WBA.O said on Thursday it would close stores, cut jobs and suspend share repurchase as the coronavirus crisis hammered its ailing Boots UK division, leading to a $2 billion impairment charge in the third quarter.

Shares of the drugstore chain fell nearly 10%, adding to year-to-date losses of about 28% through last close, after it posted a loss for the quarter, compared with a year-ago profit.

Stringent lockdown measures in Britain led to an 85% plunge in traffic in its Boots UK stores in April, the company said. Adding to the burn, its profit-yielding premium beauty and fragrance counters were closed for almost 10 weeks.

The Boots division has been a sore point for Walgreens, which has been trying to revive the unit through cost-cutting measures.

On Thursday, the company said it would close 48 Boots Opticians stores and cut 20% jobs in Boots’ UK support office, impacting more than 4,000 employees or 7% of its workforce.

Deerfield, Illinois-based Walgreens, however, sees hope in the form of its $500 million plus online business that has a “very strong position” in the beauty business, to help it rebound in the UK.

While footfall virtually ground to a halt in its Boots stores, sales surged in the online business with daily volumes reaching Black Friday levels towards the end of the third quarter, Walgreens Chief Financial Officer James Kehoe said on a post-earnings call.

“The job we have now is how do we move this business from being a $0.5 billion business to a $1 billion business.”

Raymond James analyst John Ransom, however, was not so hopeful.

“I think people are frustrated because of the poorly articulated strategy ... Walgreens has been late on everything and don’t think they have a deep grasp on the U.S. market,” he said.

Reporting by Manojna Maddipatla and Trisha Roy in Bengaluru; Editing by Anil D’Silva, Shinjini Ganguli and Maju Samuel