Unfortunately for its 240,000 employees, Walgreens is in cost-cutting mode. The world’s largest drugstore chain won’t offer bonus payouts to corporate staffers and will reduce bonus payouts for pharmacy and store managers after delivering a $180 million loss in the latest fiscal year.
“[B]ecause the majority of our annual company bonus payout is dependent upon financial performance, last week the Compensation and Leadership Performance Committee of our Board of Directors decided not to fund the company bonus payout this year,” Manmohan Mahajan, interim global chief financial officer of Walgreens Boots Alliance, wrote in a Nov. 1 memo seen by CNN. Company spokesman Fraser Engerman confirmed the news to Crain’s Chicago Business.
On top of disappointing earnings, the slashing and nixing of bonuses comes amid labor unrest. For the past two months, employees across major drugstore chains including Walgreens, CVS, and Rite Aid have been staging walkouts, demanding better pay and working conditions. The movement is fragmented, though, because unlike the automakers’ and actors’ labor groups, most of these workers are not unionized.
Walgreens, though, says these walkouts have had a minimal impact on the business.
One big number: Walgreens is cutting costs
$1 billion: Cost-reduction plan that Walgreens, which has a network of over 9,000 stores in the US, shared on Oct. 12, to bring net income in the black in the next year. In addition, it will reduce capital spending by $600 million.
Walgreens-owned VillageMD is being trimmed and primed
The decision has trickled down to VillageMD, the primary-care provider controlled by the Walgreens Boots Alliance, which is pulling back bonuses for most employees. An exception will be made for front-line clinic staff, according to a Nov. 1 staff memo from VillageMD CEO Tim Barry, seen by Bloomberg.
Also, VillageMD’s contributions to employee retirement funds will become a yearly “discretionary match” based on business performance, instead of the fixed 4% of contributions for each pay period.
Of the 680 VillageMD clinics, Walgreens plans to close 60 underperfoming stores and exit five markets. It’s also slashing budgets for travel, outside vendors, and holiday parties, the memo said.
A brief timeline of leadership shakeups at Walgreens
July 27: Walgreens chief finance officer James Kehoe resigns and Mahajan is appointed interim CFO.
Sept. 1: CEO Rosalind Brewer steps down after less than three years at helm
Oct. 2: Chief information officer (CIO) Hsiao Wang leaves within a year of his appointment
Oct. 23: Walgreens appoints healthcare industry veteran Tim Wentworth as CEO
Nov. 2: Neal Sample, who had stepped in as a consultant to Walgreens upon Wang’s departure, is hired as CIO