As financial pressures mount on Walgreens, the nation’s largest drugstore chain, the company said it will cancel bonuses this year for its corporate staff and slash bonuses sharply for its store and pharmacy managers.
The cutback comes as the company contends with both disappointing quarterly earnings and labor issues.
Walgreens on Tuesday sent out a notice to staff announcing that annual bonuses would not be funded. Tuesday was also the second day of a planned three-day series of scattered walkouts by Walgreens pharmacy staff. Employees are demanding the company fix what some say are harsh working conditions that make it difficult for them to safely fill prescriptions and which could put the health of their customers at risk.
In the internal memo obtained by CNN, Manmohan Mahajan, interim global chief financial officer of Walgreens Boots Alliance, wrote: ”Despite the significant efforts across our US segments… Our FY23 financial results did not meet expectations.”
He continued, “because 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.”
Pharmacy managers will still be able to receive up to 25% of their target bonus based on performance reviews, the company says.
The move was unrelated to any labor matters, the company said, adding that the impact of any walkouts at its 9,000 stores nationwide has been ”minimal.”
Employee concerns are far from the company’s only fiscal problems: mounting debt, budget cuts, theft, significant leadership turnover and understaffing also cloud the picture, for both Walgreens and for its drugstore competitors. But Walgreens shares, down about 40% this year to about $21, are circling a 25-year low.
Walgreens, which delivered adjusted earnings per share of 67 cents in fourth-quarter fiscal 2023, down 16.3% from the year prior, confirmed to CNN on Tuesday that it will not be funding the “corporate” bonuses for the first time since 2020. A Walgreens representative clarified to CNN that only managers were eligible for bonuses at pharmacies.
It’s been a tough year in the industry in general as Covid traffic dries up and consumers move more to alternative prescription filling services online. Rite Aid, one of the largest drugstore chains in the country, filed for bankruptcy earlier this fall. There is also worker unrest at rival CVS. Its stock is down despite recent earnings that were above analyst expectations.
But, for Walgreens, the cut in bonus pay comes just a week after the S&P downgraded its credit rating to just one notch above junk status. The agency said they were concerned about the company’s cash flow and its ability to pay down its significant debts.
“We are confident in our company’s future and the ability to deliver greater value to our customers, shareholders, partners and employees,” said Walgreens spokesperson Fraser Engerman. “We are building on the company’s pharmacy strength and trusted brand to evolve healthcare delivery. Our new CEO, Tim Wentworth, who started last week brings deep healthcare experience and a strong track record of running successful businesses. And we announced Neal Sample has joined the company as EVP and CIO, who brings over 20 years of deep technology and operating experience across highly regulated industries.”
The company did not reply to requests to interview new CEO Tim Wentworth who replaced former CEO Rosalind Brewer in October.
Walgreens employees took to Reddit to complain about the cancellation of bonuses.
“Dear Walgreens board: as you did not see fit to give me my 100% bonus this year please look forward to 25% effort,” wrote one user.
“Our AMAZING leadership decided to keep the same pay to our investors, instead of investing in their very own employees, the pharmacists and technicians suffering up front, stress and burnout in tears. WHAT A WONDERFUL PLACE TO WORK FOR,” wrote another.
The user noted that executives at the company were still taking home large paychecks.
Stefano Pessina, the former Walgreens CEO and current executive chair of the board, worth nearly $7 billion, made more than $8 million in compensation last year, according to Walgreens compensation filings with the Securities and Exchange Commission.
Former CEO, Rosalind Brewer, received a $9 million severance after less than three years on the job and will be paid a monthly consulting fee of $375,000 through February 2024., according to the company. She received a $25 million signing bonus for joining the company in 2021.
The drop in bonuses for pharmacy managers, said Shane Jerominski, an independent pharmacist in Southern California who used to work for Walgreens and is one of the walkout’s organizers, means “You incur all this extra legal risk by being the pharmacy manager and all this extra work and essentially get nothing for it.”
CVS reported strong third quarter earnings on Wednesday, but those gains come mostly from the company’s efforts to diversify its offerings away from the retail business in recent years.
Its health care benefits division saw sales rise by nearly 17% and health services grew by 8.4%.Still, the company’s stock is also getting slammed. Shares of CVS are about 27% lower so far this year.
Labor problems have added to both of these companies’ woes.
On Wednesday, a small group of protesters gathered outside of Walgreens headquarters in Deerfield, Il. to bring attention to their cause. Workers at Walgreens and CVS have previously staged walkouts in Arizona, Washington, Massachusetts and Oregon in September and early October. Those work actions have largely been haphazard. They closed a handful of pharmacies briefly, and slowed business at several others, but widespread protests did not take place.
As pharmacy workers, at Walgreens and elsewhere, are generally not unionized, it is difficult to organize mass events, organizers and employees said.
The American Pharmacists Association, an advocacy group for pharmacy workers across the country, said in a statement Monday that it “stands with every pharmacist who participated in the walkout.”
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