Segment reporting

6 Months Ended

Feb. 28, 2022

Segment Reporting [Abstract]

Segment reporting

Note 15. Segment reporting

In conjunction with the launch of its new consumer-centric healthcare strategy, in fiscal year 2022, the Company announced the creation of a new operating segment, Walgreens Health. As a result, beginning in fiscal year 2022, the Company is now aligned into three reportable segments: United States, International and Walgreens Health.

The operating segments have been identified based on the financial data utilized by the Company’s Chief Executive Officer (the chief operating decision maker) to assess segment performance and allocate resources among the Company’s operating segments. The chief operating decision maker uses adjusted operating income to assess segment profitability. The chief operating decision maker does not use total assets by segment to make decisions regarding resources; therefore, the total asset disclosure by segment has not been included.

United States

The Company’s United States segment includes the Walgreens business which includes the operations of retail drugstores, health and wellness services, and specialty and home delivery pharmacy services, and its equity method investment in AmerisourceBergen. Sales for the segment are principally derived from the sale of prescription drugs and a wide assortment of retail products, including health and wellness, beauty, personal care and consumables and general merchandise.

International

The Company’s International segment consists of pharmacy-led health and beauty retail businesses outside the U.S. and pharmaceutical wholesaling and distribution business in Germany. Pharmacy-led health and beauty retail businesses include Boots branded stores in the UK, the Republic of Ireland and Thailand, the Benavides brand in Mexico and the Ahumada brand in Chile. Sales for these businesses are principally derived from the sale of prescription drugs and health and wellness, beauty, personal care and other consumer products.

Walgreens Health

The Company’s Walgreens Health segment, created at the beginning of fiscal year 2022, is a consumer-centric, technology-enabled healthcare business that engages consumers through a personalized, omni-channel experience across the care journey. Walgreens Health delivers improved health outcomes and lower costs for payors and providers by delivering care through owned and partnered assets.

The Walgreens Health segment currently consists of a majority position in VillageMD, a leading, national provider of value-based primary care services; a majority position in Shields, a specialty pharmacy integrator and accelerator for hospitals; and the Walgreens Health organically-developed business that contracts with payors and providers to deliver clinical healthcare services to their members and members’ caregivers through both digital and physical channels.

Selling, general and administrative costs for Walgreens Health for the three and six months ended February 28, 2021 have been reclassified in the Consolidated Condensed Financial Statements and accompanying notes to conform to the current period presentation.

The results of operations for reportable segments include procurement benefits. Corporate-related overhead costs are not allocated to reportable segments and are reported in “Corporate and Other”.

The following table reflects results of operations of the Company’s reportable segments (in millions):

	Three months ended February 28,				Six months ended February 28,
	2022		2021		2022		2021
Sales:
United States	$	27,667	$	27,344	$	55,699	$	54,507
International	5,563		5,425		11,381		9,709
Walgreens Health	527		—		577		—
Corporate and Other 1	(1)		10		(1)		—
Walgreens Boots Alliance, Inc.	$	33,756	$	32,779	$	67,656	$	64,217
Adjusted operating income:
United States	$	1,588	$	1,163	$	3,277	$	2,318
International	226		146		389		232
Walgreens Health	(77)		(11)		(90)		(14)
Corporate and Other	(79)		(72)		(143)		(114)
Walgreens Boots Alliance, Inc.	$	1,657	$	1,225	$	3,434	$	2,422

1.Includes certain eliminations.

The following table reconciles adjusted operating income to operating income (in millions):

	Three months ended February 28,				Six months ended February 28,
	2022		2021		2022		2021
Adjusted operating income	$	1,657	$	1,225	$	3,434	$	2,422
Adjustments to equity earnings (loss) in AmerisourceBergen	(51)		(45)		(94)		(1,526)
Transformational cost management	(70)		(178)		(273)		(278)
Acquisition-related amortization	(250)		(114)		(415)		(209)
Certain legal and regulatory accruals and settlements	—		(60)		—		(60)
LIFO provision	5		(2)		(9)		(35)
Acquisition-related costs	(44)		5		(115)		(16)
Operating income	$	1,246	$	832	$	2,529	$	298