The CEO of Walgreens Boots Alliance has resigned after less than three years, a time dominated by COVID-19 challenges, declining profits and a shrinking stock price.
The Deerfield-based pharmacy chain said Friday that Rosalind Brewer and the company’s board “mutually agreed” to her departure, which was effective Thursday.
It said it has begun a search for a successor and has appointed a board member, Ginger Graham, as interim CEO. Graham has been on the Walgreens board since 2010 and has a background in the pharmaceutical and medical technology fields.
The change comes after Brewer directed Walgreens’ expensive push into direct health care, including its nearly $9 billion purchase of Summit Health last year. The new strategy has been slow to pay dividends as Walgreens also faced pressures on its traditional pharmacy and retail divisions.
Under Brewer, Walgreens ordered layoffs of around 500 workers, 10% of the total at its Deerfield headquarters and Chicago office, as well as other job cuts around the company. It set aside $6.8 billion this year to cover settlements of claims involving dispensing of opioids.
A regulatory filing spelled out terms of Brewer’s departure. It said she’ll get a $9 million severance, twice her annual base salary plus a targeted bonus. She’ll also get a bonus for the current fiscal year, immediate vesting of shares she has yet to receive under an incentive plan and company-subsidized health care for two years.
Brewer also will be paid a monthly consulting fee of $375,000 through Feb. 29, 2024, the filing said.
It was a “sudden and unexpected leadership change,” said equity analyst Keonhee Kim, who follows Walgreens for Morningstar. He said the expansion into health care “hasn’t been as smooth as the company expected.”
Kim said it’ll be interesting to see if the company finds a CEO who devotes more attention to the company’s traditional side.
“There are a lot of external pressures Brewer couldn’t control,” Kim said, citing COVID-19 and the pressure it put on staffing, followed by a business drop-off when people no longer sought vaccinations.
Kim still has a positive outlook and a $40 price target on the shares, which have lost about a third of their value in the last 12 months and are trading at less than $24 each.
Shifting strategy
Brewer oversaw a culling of Walgreens locations. It is closing 150 stores in the United States and 300 in the United Kingdom, about 4% of outlets in those markets.
She has more experience in the retail side of the business, which “is simply not an area that Walgreens wants to pursue as a major growth opportunity,” said Neil Saunders, managing director of GlobalData. Brewer used to be chief operating officer at Starbucks.
“Health care is a lucrative sector, and Walgreens is not wrong to see it as a major part of its future playbook,” Saunders said. “However, the new permanent CEO will need to remember that it is possible to invest in both health care and retail. It should not be an either/or decision.”
In a statement, Brewer said the company has recruited a world-class team of leaders.
“I am confident that WBA is on track to be a leading consumer-centric health care company, serving thousands of communities across the country, especially those that need access to healthcare the most,” she said. “I look forward to watching the company continue its transformation to deliver localized health care.”
Walgreens also is searching for a CFO to replace James Kehoe, who departed in August. In January, Kehoe surprised analysts when he said the company may have overstated the costs to its business of “shrinkage,” the retail term for theft and other inventory losses.
In Chicago, Walgreens’ retail strategies have included making items accessible only to employees in a South Loop store and playing classical music outside a few locations in the belief it repels loiterers and panhandlers.
Contributing: AP
