Walgreens Boots Alliance Inc. said it plans to cut about 4,000 jobs in the U.K. and suspend stock buybacks as demand fell off in its international business during the drugstore chain’s latest quarter. The pharmacy chain on Thursday said the coronavirus pandemic sliced out around $700 million to $750 million in sales for its quarter ended May 31, with most of the impact tied to its retail-pharmacy business overseas.

A “dramatic reduction” in customer traffic, including an 85% decline in April, weighed on demand for its Boots U.K. stores, Walgreens said. The company said it recorded noncash impairment charges of $2 billion tied to the Boots U.K. unit. The job cuts in the U.K. will impact about 7% of its workforce there and less than 1% of its global staff and will include closing 48 Boots opticians and a 20% head-count reduction in the company’s U.K. support offices.

Stores in the U.S. fared better. Sales at U.S. stores open at least a year were up 3% from the same period a year ago, beating expectations. Analysts predicted they would decline slightly by 0.2%, according to a StreetAccount consensus estimate. In the pharmacy part of the stores, same-store sales rose by 3.5% compared with the same time last year. The company said brand inflation and an increase in specialty sales offset the drop in prescription volumes because of Covid-19. Same-store retail sales grew by 1.9% for the quarter, as there was strong customer demand for vitamins and protective equipment like masks.

The company said the U.S. business, which was a bright spot in the third quarter, is expected to have stronger sales in the next quarter but warned margins will be squeezed by pandemic-related factors, such as increased home deliveries. Kehoe said Walgreens remains in a strong financial position, pointing to its free cash flow, its cost-savings program and new business opportunities.

Todd Horwitz Chief Strategist BubbaTrading.com
Stop being a prophet and make profits