Exit and disposal activities

9 Months Ended

May 31, 2023

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 achieved this goal at the end of fiscal 2021.

On October 12, 2021, the Company expanded and extended the Transformational Cost Management Program through the end of fiscal 2024 and increased its annual cost savings target to $3.3 billion by the end of fiscal 2024. In fiscal 2022, the Company increased its annual cost savings target from $3.3 billion to $3.5 billion by the end of fiscal 2024. During the three months ended May 31, 2023, the Company increased its annual cost savings target from $3.5 billion to $4.1 billion by the end of fiscal 2024. The Company is currently on track to achieve the savings target.

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 primarily on the U.S. Retail Pharmacy 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. The Company now plans to reduce its presence by up to 300 Boots stores in the UK and up to 150 stores in the U.S. by end of fiscal 2024, which are incremental to the previously planned reductions of approximately 350 Boots stores in the UK and approximately 450 to 500 stores in the U.S. As of May 31, 2023, the Company has closed 261 and 455 stores in the UK and U.S., respectively.

During the three months ended May 31, 2023, the Company increased its estimate of cumulative pre-tax charges to its GAAP financial results for the Transformational Cost Management Program from $3.6 billion to $3.9 billion to $3.9 billion to $4.2 billion. As a result, pre-tax charges for exit and disposal activities increased from $3.3 billion to $3.6 billion to $3.6 billion to $3.9 billion. In addition to the impacts discussed above, 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.

From the inception of the Transformational Cost Management Program to May 31, 2023, the Company has recognized cumulative pre-tax charges to its financial results in accordance with GAAP of $2.7 billion, which were primarily recorded within Selling, general and administrative expenses within the Consolidated Condensed Statements of Earnings. These charges included $753 million related to lease obligations and other real estate costs, $827 million in asset impairments, $824 million in employee severance and business transition costs and $247 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 nine months ended May 31, 2023 and 2022, respectively, was as follows (in millions):


Three months ended May 31, 2023	U.S. Retail Pharmacy		International		U.S. Healthcare		Corporate and Other		Walgreens Boots Alliance, Inc.
Lease obligations and other real estate costs	$	35	$	18	$	—	$	—	$	53
Asset impairments	12		150		109		—		272
Employee severance and business transition costs	50		13		4		4		71
Information technology transformation and other exit costs	7		12		—		—		19
Total exit and disposal charges	$	104	$	193	$	113	$	4	$	414


Nine months ended May 31, 2023	U.S. Retail Pharmacy		International		U.S. Healthcare		Corporate and Other		Walgreens Boots Alliance, Inc.
Lease obligations and other real estate costs	$	133	$	18	$	—	$	—	$	151
Asset impairments	127		149		109		—		385
Employee severance and business transition costs	72		15		4		11		102
Information technology transformation and other exit costs	23		22		—		—		45
Total exit and disposal charges	$	354	$	204	$	113	$	11	$	682


Three months ended May 31, 2022	U.S. Retail Pharmacy		International		U.S. Healthcare		Corporate and Other		Walgreens Boots Alliance, Inc.
Lease obligations and other real estate costs	$	16	$	3	$	—	$	—	$	18
Asset impairments	48		14		—		—		61
Employee severance and business transition costs	53		22		—		11		86
Information technology transformation and other exit costs	1		6		—		—		7
Total exit and disposal charges	$	117	$	45	$	—	$	11	$	173


Nine months ended May 31, 2022	U.S. Retail Pharmacy		International		U.S. Healthcare		Corporate and Other		Walgreens Boots Alliance, Inc.
Lease obligations and other real estate costs	$	107	$	6	$	—	$	—	$	113
Asset impairments	64		42		—		—		105
Employee severance and business transition costs	110		32		—		25		166
Information technology transformation and other exit costs	3		18		—		—		20
Total exit and disposal charges	$	283	$	97	$	—	$	25	$	404

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, 2022	$	10	$	—	$	76	$	27	$	113
Costs	151		385		102		45		682
Payments	(69)		—		(103)		(46)		(218)
Other	(81)		(385)		13		(2)		(455)
Balance at May 31, 2023	$	11	$	—	$	88	$	23	$	121