Walgreens cuts bonuses amid financial weakness

Walgreens is eliminating bonuses for corporate staff and reducing bonuses for pharmacy and store managers this year, a spokesman for the drugstore chain told Supermarket News.

The company notified workers in an internal memo on Oct. 31 that it would not pay bonuses to corporate staff this year, according to reporting from CNN. In the memo, Walgreens Boots Alliance said weaker-than-expected financial results in the recently ended fiscal year forced the company to eliminate the bonuses.

“Walgreens corporate and support center employees will not receive a bonus payment,” Fraser Engerman, senior director, external relations, Walgreen Co., told SN. “However, pharmacy and store managers will be eligible to receive a partial bonus payment this year.”

Pharmacy managers will still be able to receive up to 25% of their target bonus based on performance reviews, CNN reported.

The slashing of bonuses comes as pharmacy workers at both Walgreens and rival CVS have protested their heavy workloads and staged scattered walkouts at stores around the country. Both companies said the walkouts have had minimal impact on their stores.

CVS, which recently posted double-digit revenues gains for the third quarter, also said it has invested more than $1 billion in its pharmacy staff and is investing in technologies to streamline pharmacy workloads.

Related:CVS, Walgreens both say pharmacist ‘walkout’ had minimal impact

Both Walgreens and CVS have also announced plans for hundreds of store closures around the country, and Rite Aid, the No. 3 drugstore chain, recently filed bankruptcy.

Bonus cuts unrelated to labor actions

Walgreens said the bonus cuts were unrelated to the recent labor actions, and instead reflect the company’s weak financial performance, according to CNN.

In its recently ended fiscal year, Walgreens Boots Alliance reported a loss of $3.1 billion, compared with net income of $4.3 billion in the preceding year. The recent fiscal year included an after-tax charge of $5.5 billion for opioid-related settlements and claims, partially offset by other one-time gains. Adjusted net earnings were $3.4 billion, a decrease of 20.5% percent from the previous fiscal year on a constant currency basis, primarily driven by lower adjusted operating income.

The company said a weak earnings performance in the fourth quarter, relative to a year ago, reflected declining COVID-related sales and fewer respiratory illnesses relative to a year ago. Walgreens administered about 400,000 COVID vaccinations in the quarter, down from 2.9 million in the prior-year quarter, the company said, for example.

Related:Walgreens reaches $192.5M settlement with Rite Aid investors

Meanwhile, Standard & Poor’s downgraded Walgreens’ credit rating to one notch above junk status, CNN reported, as the rating agency cited concerns about the company’s cash flow and its ability to pay down debt.

“We are confident in our company’s future and the ability to deliver greater value to our customers, shareholders, partners and employees,” Engerman told CNN.