Walgreens Boots Alliance Inc., which operates thousands of U.S. drugstores, said it will try and cut another US$300 million from its annual costs as it expects growth to flatten in the 2020 fiscal year.

The pharmacy chain raised its 2022 annual savings target to US$1.8 billion, up for US$1.5 billion. Adjusted earnings per share will be “roughly flat” in fiscal 2020, Walgreens said.

KEY INSIGHTS

• U.S. drugstore sales, the biggest part of Walgreens’s business, were up 2.1 per cent to US$26 billion from a year prior. The gains were driven by more prescriptions being filled at back-of-the-store pharmacies, a trend across the industry that’s helped offset front-of-the-store retail pain.

• Non-pharmacy retail sales of items like shampoo, makeup and cigarettes were hurt by a plan to stop selling tobacco to customers under age 21, implemented Sept. 1, and led to a 1.2-per-cent drop in same-store retail sales. Rival chain CVS Health Corp. stopped selling tobacco products entirely in 2014, saying at the time that offering a cancer-causing product didn’t fit with its focus on health.

• The Deerfield, Illinois-based company has repeatedly expanded the cost-cutting plan, which originally targeted at least US$1 billion in annual savings by 2022 and was expanded this spring to more than US$1.5 billion. Savings will come from streamlining operations and digitizing some functions. It has also closed stores, disclosing plans in August to close 200 U.S. locations on top of a previously announced cut of as many as 750 stores.

MARKET REACTION

• The shares were up 1.5 per cent in trading before the market opened in New York. They’re down 19 per cent this year to date, one of the 50-worst performers on the S&P 500.

• Net earnings attributable to Walgreens were US$677 million in the fiscal fourth quarter, down from US$1.51 billion a year prior.

• Fourth-quarter adjusted earnings were US$1.43 a share, compared to the US$1.41 average of analysts’ estimates.