Exit and disposal activities

3 Months Ended

Nov. 30, 2021

Restructuring and Related Activities [Abstract]

Exit and disposal activities

Exit and disposal activities

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 achieved this goal at the end of fiscal 2021.

On October 12, 2021, the Company’s Board of Directors approved an expansion and extension of the Transformational Cost Management Program through the end of fiscal 2024. As a result, the Company increased its annual cost savings target to $3.3 billion by the end of fiscal 2024.

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 which focus on the United States and International reportable segments along with the Company’s global functions. Divisional optimization within the Company’s segments includes activities such as optimization of stores. As a result of the expanded program, the Company plans to reduce its presence by up to 150 Boots stores in the UK and up to 150 stores in the United States over the next three years which are incremental to the previously planned reductions of approximately 200 Boots stores in the UK and approximately 250 stores in the United States.

The Company currently estimates that the Transformational Cost Management Program will result in cumulative pre-tax charges to its GAAP financial results of approximately $3.6 billion to $3.9 billion, of which $3.3 billion to $3.6 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 transition adjustments to decrease retained earnings due to the adoption of the new lease accounting standard (Topic 842) that became effective on September 1, 2019.

Since the inception of the Transformational Cost Management Program to November 30, 2021, the Company has recognized cumulative pre-tax charges to its financial results in accordance with GAAP of $1.5 billion, which were primarily recorded within selling, general and administrative expenses. These charges included $442 million related to lease obligations and other real estate costs, $292 million in asset impairments, $550 million in employee severance and business transition costs and $172 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 months ended November 30, 2021 and 2020, respectively, were as follows (in millions):

Three months ended November 30, 2021	United States		International		Corporate and Other		Walgreens Boots Alliance, Inc.
Lease obligations and other real estate costs	$	87	$	2	$	—	$	89
Asset impairments	15		25		—		40
Employee severance and business transition costs	20		10		7		37
Information technology transformation and other exit costs	1		7		1		9
Total pre-tax exit and disposal charges	$	123	$	44	$	9	$	175

Three months ended November 30, 2020	United States		International		Corporate and Other		Walgreens Boots Alliance, Inc.
Lease obligations and other real estate costs	$	22	$	—	$	—	$	22
Asset impairments	4		(2)		—		1
Employee severance and business transition costs	12		28		12		52
Information technology transformation and other exit costs	10		(5)		—		5
Total pre-tax exit and disposal charges	$	48	$	21	$	12	$	81

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, 2021	$	17	$	—	$	77	$	20	$	114
Costs	89		40		37		9		175
Payments	(15)		—		(51)		(7)		(74)
Other	(72)		(40)		(3)		—		(115)
Currency	—		—		(1)		—		(1)
Balance at November 30, 2021	$	19	$	—	$	59	$	23	$	101