Exit and disposal activities

12 Months Ended

Aug. 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. In fiscal 2023, the Company increased its annual cost savings target from $3.5 billion to $4.5 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 200 stores in the U.S. by the end of fiscal 2024, which are incremental to the fiscal 2022 previously planned reductions of approximately 350 Boots stores in the UK and approximately 450 to 500 stores in the U.S. As of August 31, 2023, the Company has closed 291 and 466 stores in the UK and U.S., respectively.

In fiscal 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 $4.1 billion to $4.4 billion. As a result, pre-tax charges for exit and disposal activities increased from $3.3 billion to $3.6 billion to $3.8 billion to $4.1 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 August 31, 2023, the Company has recognized cumulative pre-tax charges to its financial results in accordance with GAAP of $3.1 billion, which were primarily recorded within Selling, general and administrative expenses within the Consolidated Statements of Earnings. These charges included $1.1 billion related to lease obligations and other real estate costs, $883 million in asset impairments, $873 million in employee severance and business transition costs and $253 million of information technology transformation and other exit costs.

Costs related to exit and disposal activities under the Transformational Cost Management Program for fiscal 2023, 2022 and 2021, respectively, were as follows (in millions):


Fiscal 2023	U.S. Retail Pharmacy		International		U.S. Healthcare		Corporate and Other		Walgreens Boots Alliance, Inc.
Lease obligations and other real estate costs	$	492	$	23	$	—	$	1	$	516
Asset impairments	183		149		109		—		441
Employee severance and business transition costs	111		20		6		13		150
Information technology transformation and other exit costs	30		21		—		—		51
Total pre-tax exit and disposal charges	$	816	$	213	$	115	$	14	$	1,158


Fiscal 2022	U.S. Retail Pharmacy		International		U.S. Healthcare		Corporate and Other		Walgreens Boots Alliance, Inc.
Lease obligations and other real estate costs	$	247	$	2	$	—	$	—	$	249
Asset impairments	132		58		—		—		190
Employee severance and business transition costs	156		29		—		25		210
Information technology transformation and other exit costs	12		29		—		—		40
Total pre-tax exit and disposal charges	$	546	$	118	$	—	$	25	$	690


Fiscal 2021	U.S. Retail Pharmacy		International		U.S. Healthcare		Corporate and Other		Walgreens Boots Alliance, Inc.
Lease obligations and other real estate costs	$	103	$	6	$	—	$	—	$	108
Asset impairments	15		9		—		—		24
Employee severance and business transition costs	79		40		—		45		165
Information technology transformation and other exit costs	20		17		—		—		38
Total pre-tax exit and disposal charges	$	217	$	72	$	—	$	46	$	335

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	249		190		210		40		690
Payments	(99)		—		(201)		(23)		(323)
Other	(157)		(190)		(9)		(11)		(367)
Balance at August 31, 2022	$	10	$	—	$	76	$	27	$	113
Costs	516		441		150		51		1,158
Payments	(105)		—		(160)		(55)		(320)
Other	(411)		(441)		2		—		(849)
Balance at August 31, 2023	$	10	$	—	$	70	$	22	$	102

Other exit and disposal activities

In September 2023, VillageMD approved the exit from approximately five markets, including the closure of approximately 60 clinics in fiscal 2024.