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

Walgreens Boots Alliance's acquisition by private equity firm Sycamore Partners would give it more flexibility to “aggressively” cut costs to address persistent industry challenges, according to industry analysts. .

“As a private company, WBA [Walgreens Boots Alliance] In our view, the company has the flexibility to make significant changes to its business and aggressively reduce costs to address recent challenges such as declining retail product sales due to pharmacy operating margins and increased online competition. It can be done,” said Paige Meyer, an analyst at CFRA Research.

Meyer maintained a “hold” opinion on the company's stock, which is down about 60% since the beginning of the year.

Reasons why local pharmacies are closing

The company is in talks to sell itself to a private equity firm and a deal is expected to be finalized by early next year, sources told Reuters. But Walgreens has been working with advisers over the past few weeks and has reached out to other potential buyers, people told Reuters.

Walgreens declined to comment. FOX Business reached out to Sycamore Partners.

The reported talks came as the company was already working to revamp its business under new leadership. Profitability challenges and declining profit margins.

In October, the company, which has struggled to compete with rivals such as Amazon, announced plans to close at least 1,200 stores over the next three years. The move is part of an effort to close a “significant” number of underperforming locations across the United States in response to these challenges.

Walgreens pays $106.8 million for billing government for unfilled prescriptions

Walgreens previously told FOX Business that its retail pharmacy business is central to its future business strategy, but that “increasing regulatory and reimbursement pressures will reduce the company's ability to cover costs related to rent, staffing and supply needs.” It's weighing on my ability.”

George Hill, managing director and senior equity research analyst at Deutsche Bank, expects more closures as the industry right-sizes.

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Hill previously told FOX Business that “the entire industry is The footprints seemed to be increasing. And the number of stores grew faster than the need for pharmacies grew. ”

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