Exit and disposal activities

6 Months Ended

Feb. 28, 2021

Restructuring and Related Activities [Abstract]

Transformational Cost Management Program

On December 20, 2018, the Company announced a transformational cost management program that was expected to deliver in excess of $2.0 billion of annual cost savings by fiscal 2022 (the “Transformational Cost Management Program”). The Company continues to expect to deliver in excess of $2.0 billion of annual cost savings by fiscal 2022 from continuing operations, after excluding amounts related to the Disposal Group.

The Transformational Cost Management Program, which is multi-faceted and includes divisional optimization initiatives, global smart spending, global smart organization and the transformation of the Company’s information technology (IT) capabilities, is designed to help the Company achieve increased cost efficiencies. To date, the Company has taken actions across all aspects of the Transformational Cost Management Program. The actions under the Transformational Cost Management Program focus on the two reportable segments and the Company’s Corporate and global functions. Divisional optimization within each of the Company’s segments includes activities such as optimization of stores, including current plans to exit approximately 200 Boots stores in the United Kingdom (“UK”) and approximately 250 stores in the United States (“U.S.”).

The Company currently estimates that the Transformational Cost Management Program will result in cumulative pre-tax charges to its GAAP financial results in continuing operations of approximately $2.1 billion to $2.3 billion, subject to approval pending close of the Pharmaceutical Wholesale Transaction, of which $1.8 billion to $2.0 billion are expected to be recorded as exit and disposal activities. In addition to these impacts, as a result of the actions related to store closures taken under the Transformational Cost Management Program, the Company recorded $508 million of non-cash transition adjustments to decrease retained earnings due to the adoption of the new lease accounting standard that became effective on September 1, 2019.

Since the inception of the Transformational Cost Management Program to February 28, 2021, the Company has recognized cumulative pre-tax charges to its financial results in accordance with GAAP of $1.2 billion, which were primarily recorded within selling, general and administrative expenses. These charges included $271 million related to lease obligations and other real estate costs, $231 million in asset impairments, $519 million in employee severance and business transition costs and $142 million of information technology transformation and other exit costs.

Costs related to exit and disposal activities under the Transformational Cost Management Program for the three and six months ended February 28, 2021 and February 29, 2020 were as follows (in millions):


Three months ended February 28, 2021	United States		International		Corporate and Other		Walgreens Boots Alliance, Inc.
Lease obligations and other real estate costs	$	18	$	—	$	—	$	18
Asset impairment	1		3		—		4
Employee severance and business transition costs	99		6		17		122
Information technology transformation and other exit costs	4		7		—		11
Total pre-tax exit and disposal charges	$	122	$	16	$	17	$	154


Six months ended February 28, 2021	United States		International		Corporate and Other		Walgreens Boots Alliance, Inc.
Lease obligations and other real estate costs	$	40	$	—	$	—	$	40
Asset impairments	5		—		—		5
Employee severance and business transition costs	111		34		29		174
Information technology transformation and other exit costs	14		2		—		15
Total pre-tax exit and disposal costs	$	170	$	36	$	29	$	235


Three months ended February 29, 2020	United States		International		Corporate and Other		Walgreens Boots Alliance, Inc.
Lease obligations and other real estate costs	$	9	$	1	$	—	$	10
Asset impairment	3		—		—		3
Employee severance and business transition costs	34		32		6		71
Information technology transformation and other exit costs	1		7		13		21
Total pre-tax exit and disposal charges	$	47	$	40	$	18	$	105


Six months ended February 29, 2020	United States		International		Corporate and Other		Walgreens Boots Alliance, Inc.
Lease obligations and other real estate costs	$	10	$	3	$	—	$	13
Asset impairments	11		3		—		14
Employee severance and business transition costs	65		34		7		106
Information technology transformation and other exit costs	9		10		13		31
Total pre-tax exit and disposal costs	$	95	$	50	$	20	$	164

The changes in liabilities and assets related to the exit and disposal activities under Transformational Cost Management Program include the following (in millions):


	Lease obligations and other real estate costs		Asset Impairments		Employee severance and business transition costs		Information technology transformation and other exit costs		Total
Balance at August 31, 2020	$	19	$	—	$	166	$	14	$	199
Costs	40		5		174		15		235
Payments	(36)		—		(135)		(22)		(193)
Other	(6)		(5)		(3)		(3)		(17)
Currency	1		—		3		(1)		3
Balance at February 28, 2021	$	19	$	—	$	206	$	3	$	228

Store Optimization Program

On October 24, 2017, the Company’s Board of Directors approved a plan to implement a program (the “Store Optimization Program”) to optimize store locations through the planned closure of approximately 600 stores and related assets within the Company’s United States segment upon completion of the acquisition of certain stores and related assets from Rite Aid. The Company closed 769 stores and related assets. The actions under the Store Optimization Program commenced in March 2018 and were completed in the fourth quarter of fiscal 2020.

Costs related to the Store Optimization Program for the three and six months ended February 29, 2020 were $18 million and $21 million for lease obligation and other real estate costs and $12 million and $18 million for employee severance and other exit costs, respectively. The liabilities related to the Store Optimization Program as of February 28, 2021 and February 29, 2020 were not material.