The CEO of Walgreens Boots Alliance has resigned after less than three years, a period marked by COVID-19 challenges, falling profits and a declining stock price.
The Deerfield-based pharmacy chain said Friday that Rosalind Brewer and the company’s board of directors had “mutually agreed” to her departure, effective Thursday.
It said it had begun a search for a successor and named a board member, Ginger Graham, as interim CEO. Graham has served on the board of Walgreens since 2010 and has a background in pharmaceuticals and medical technology.
The change comes after Brewer led Walgreens’ expensive push into direct health care, including its nearly $9 billion acquisition of Summit Health last year. The new strategy was slow to pay off as Walgreens also faced pressure on its traditional pharmacy and retail divisions.
Under Brewer, Walgreens ordered the layoffs of about 500 workers, 10% of the total, at its Deerfield headquarters and Chicago office, as well as other job cuts throughout the company. This year, $6.8 billion was allocated to settle claims related to the distribution of opioids.
A regulatory filing outlined the terms of Brewer’s departure. It said she would receive a $9 million severance package, twice her annual base salary plus a targeted bonus. She also receives a bonus for the current fiscal year, immediate vesting of shares not yet received under an incentive plan, and company-subsidized health care for two years.
Brewer will also be paid a monthly advisory 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 tracks Walgreens for Morningstar. He said the expansion into the healthcare sector “has not gone as smoothly as the company expected.”
Kim said it will be interesting to see if the company finds a CEO who will pay more attention to the traditional side of the business.
“There are a lot of external pressures that Brewer couldn’t control,” Kim said, citing COVID-19 and the pressure it caused on staffing, followed by a decline in business as people stopped seeking 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 past 12 months and are trading for less than $24 apiece.
Change of strategy
Brewer oversaw the elimination of Walgreens locations. The company is closing 150 stores in the United States and 300 in the United Kingdom, about 4% of stores in those markets.
She has more experience in the retail side of the business, which is “simply not an area that Walgreens wants to exploit as a major growth opportunity,” said Neil Saunders, managing director of GlobalData. Brewer was formerly chief operating officer at Starbucks.
“Health care is a lucrative sector, and Walgreens is not wrong to see it as an important part of its future plan,” Saunders said. “However, the new permanent CEO must remember that it is possible to invest in both healthcare and retail. It shouldn’t be an either/or decision.”
In a statement, Brewer said the company has recruited a world-class leadership team.
“I am confident that WBA is on its path to becoming a leading consumer-focused healthcare company, serving thousands of communities across the country, particularly those who need access to healthcare most,” she said. “I look forward to watching the company continue its transformation to provide local healthcare.”
Walgreens is also looking for a CFO to replace James Kehoe, who left in August. In January, Kehoe surprised analysts when he said the company may have overstated the cost to its business of “shrinkage,” the retail term for theft and other inventory losses.
Walgreens’ retail strategies in Chicago included making merchandise in a South Loop store accessible only to employees and playing classical music outside some locations in the belief that this would deter drifters and fraudsters.