Exit and disposal activities

12 Months Ended

Aug. 31, 2024

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. The program was subsequently expanded and extended, with the most recent update in fiscal 2023, when the Company increased its annual cost savings target from $3.5 billion to $4.5 billion by the end of fiscal 2024. While most of the initiatives under the program were completed by the end of fiscal 2024, certain initiatives are expected to extend into fiscal 2025. The Company does not expect to incur material exit and disposal charges related to the finalization of these initiatives.

The Transformational Cost Management Program, which was multi-faceted and included divisional optimization initiatives, global smart spending, global smart organization and the transformation of the Company’s information technology (“IT”) capabilities, was designed to help the Company achieve increased cost efficiencies. The Company took actions across all aspects of the Transformational Cost Management Program, which focused 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 included activities such as optimization of stores. The Transformational Cost Management Program resulted in the approval to close approximately 650 Boots stores in the United Kingdom (“UK”) and approximately 950 stores in the U.S. As of August 31, 2024, the Company has closed 624 and 676 stores in the UK and U.S., respectively.

Cumulative pre-tax charges to the Company’s GAAP financial results for the Transformational Cost Management Program were $4.3 billion, of which pre-tax charges for exit and disposal activities were $4.0 billion. The charges were primarily recorded within Selling, general and administrative expenses within the Consolidated Statements of Earnings. These charges included $1.7 billion related to lease obligations and other real estate costs, $1.0 billion in asset impairments, $1.0 billion in employee severance and business transition costs and $300 million of IT transformation and other exit costs. 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.

Costs related to exit and disposal activities under the Transformational Cost Management Program for fiscal 2024, 2023 and 2022, respectively, were as follows (in millions):


Fiscal 2024	U.S. Retail Pharmacy		International		U.S. Healthcare		Corporate and Other		Walgreens Boots Alliance, Inc.
Lease obligations and other real estate costs	$	535	$	—	$	—	$	—	$	535
Asset impairments	104		16		8		—		128
Employee severance and business transition costs	93		(3)		6		6		102
Information technology transformation and other exit costs	39		19		13		—		70
Total pre-tax exit and disposal charges	$	770	$	32	$	26	$	6	$	835


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

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	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
Costs	535		128		102		70		835
Payments	(223)		—		(145)		(62)		(430)
Other	(315)		(128)		—		(28)		(471)
Balance at August 31, 2024	$	8	$	—	$	26	$	2	$	36

Other exit and disposal activities

In fiscal 2024, VillageMD approved the closure of approximately 160 clinics. As a result, long-lived and intangible assets of $303 million were impaired within the U.S. Healthcare segment. The impairment charges were recorded in Selling, general and administrative expenses within the Consolidated Statements of Earnings.

In fiscal 2024, management ceased development of, and abandoned, a multi-year internal software development project within the U.S. Retail Pharmacy segment. As a result, previously capitalized internally-developed software of $455 million was impaired. The impairment charge was recorded in Selling, general and administrative expenses within the Consolidated Statements of Earnings.