Walgreens CEO To Step Down, Become Chairman -- WSJ
July 28 2020 - 3:02AM
Dow Jones News
By Sharon Terlep and Dave Sebastian
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (July 28, 2020).
Walgreens Boots Alliance Inc. said Stefano Pessina will step
down as chief executive, kicking off a search for a new leader at
the company as the coronavirus pandemic has dented profits and
complicated a turnaround.
Mr. Pessina, a 79-year-old Italian billionaire and one of the
drugstore chain's largest single shareholders, took over five years
ago following the merger of Walgreens and European pharmacy chain
Alliance Boots.
Walgreens, the largest U.S. drugstore chain by stores, said
Monday that Mr. Pessina will remain CEO during the search for his
replacement. He will become executive chairman upon stepping down,
replacing James Skinner, who will remain on the board.
Even before the coronavirus outbreak, Walgreens and rival CVS
Health Corp. were dealing with smaller profits from prescription
drugs and competition from online rivals that have hurt retail
sales. Illinois-based Walgreens responded by cutting costs in its
home market and last year said it was closing 200 stores.
The pandemic has put further pressure on drugstores, as patients
put off visiting doctors and other health providers, which has cut
into prescription sales. Lockdowns have also reduced stores visits
and retail sales.
Walgreens this month said it was cutting about 4,000 jobs in the
U.K. and suspending stock buybacks as demand fell off in its
international business. For its quarter ended May 31, the company
said the Covid-19 pandemic sliced off $700 million to $750 million
in sales, with most of the effects tied to its global
retail-pharmacy business.
Where CVS has built itself into a health-care behemoth through
acquisitions of pharmacy benefit manager Caremark in 2006 and
insurer Aetna Inc. in 2018, Walgreens shifted away from all-out
acquisitions came after unsuccessful attempts to buy Humana and
rival Rite Aid Corp.
Mr. Pessina in recent years has championed a strategy of
partnerships, with Walgreens teaming up with companies ranging from
insurer Humana Inc. to grocer Kroger Co. In June, the company
announced a deal with primary-care provider VillageMD to attach
physician offices to hundreds of U.S. drugstores.
Walgreens's efforts have yet to deliver higher revenue and
profits, but Mr. Pessina has urged Wall Street to be patient.
Walgreens shares are down nearly 30% in the past year while CVS
shares rose 14% in the same period.
Mr. Pessina, who has a degree in nuclear engineering, worked for
several years in academia before taking over his family
drug-distribution business. He has claimed to have completed more
than 150 acquisitions as he consolidated the business around
Europe.
One of those acquisitions was a company headed by Ornella Barra,
who has been Mr. Pessina's life partner for three decades. Today
she is Walgreens's co-chief operating officer.
In 2006, he merged his business, then known as Alliance UniChem,
with the U.K.-based Boots drugstore chain. A year later, he joined
with KKR & Co. to buy out the company and take it private for
$18.5 billion. The deal making continued, and in 2012 Alliance
Boots agreed to sell a 45% stake to Walgreens for $6.7 billion. In
2014, Walgreens bought the rest of Alliance Boots for around $14.7
billion.
Mr. Pessina became the company's executive vice chairman in
January 2015, a month after the Alliance Boots deal, and
subsequently served as interim CEO before being confirmed in the
role in June 2015. Mr. Skinner, who once led McDonald's Corp., has
been executive chairman of Walgreens since January 2015.
The company's shares fell 1.7% on Monday.
Corrections & Amplifications Walgreens completed its
purchase of Alliance Boots in 2014. An earlier version of this
article incorrectly said the transaction was completed last year.
(Corrected on July 27)
Write to Sharon Terlep at sharon.terlep@wsj.com and Dave
Sebastian at dave.sebastian@wsj.com
(END) Dow Jones Newswires
July 28, 2020 02:47 ET (06:47 GMT)
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