Exit and disposal activities

6 Months Ended

Feb. 28, 2025

Restructuring and Related Activities [Abstract]

Footprint Optimization Program

On October 14, 2024, the Company’s Board of Directors approved a plan to optimize its footprint and close underperforming stores, primarily within the Company’s U.S. Retail Pharmacy segment (the “Footprint Optimization Program”). Execution of this program realigns the Company’s footprint with evolving demographic trends and enhances its capacity to respond more effectively to shifts in consumer behavior and buying preferences. This increased agility in adapting to a changing environment is a key objective of the Company’s strategic review, and a critical area in which the Company aims to close the competitive gap with peers that have taken similar initiatives over the past years.

The Footprint Optimization Program includes plans to close approximately 900 to 1,000 stores primarily across the U.S. by the end of fiscal 2027. Considering the remaining stores approved, but not yet closed under the Transformational Cost Management Program at the beginning of fiscal 2025, the Company expects to close 1,200 to 1,300 stores by the end of fiscal 2027. The cadence of store closures prioritizes estimated cash flow benefits, underperforming locations, and lease expirations. In the six months ended February 28, 2025, the Company closed 247 stores related to these programs.

The Company currently estimates that it will recognize cumulative pre-tax charges to its GAAP financial results of approximately $2.2 billion to $2.4 billion, including costs associated with lease obligations and other real estate costs, asset impairments, and employee severance and other exit costs. The Company expects to incur pre-tax charges of approximately $1.8 billion to $2.0 billion for lease obligations and other real estate costs including runoff costs associated with location optimization under prior programs, approximately $300 million of asset impairments, and approximately $100 million for employee severance and other exit costs. While certain charges, such as right-of-use asset impairments, are non-cash in nature, the related lease liabilities will necessitate future cash payments. As a result, the Company estimates that approximately 90% of these cumulative pre-tax charges will result in future cash expenditures. The amounts and timing of all estimates are subject to change until finalized. The actual amounts and timing may vary materially based on various factors.

Since the inception of the Footprint Optimization Program, the Company has recognized cumulative pre-tax charges in its financial results in accordance with GAAP of $400 million, which were primarily recorded in Selling, general and administrative expenses within the Consolidated Condensed Statements of Earnings. These charges include $206 million related to lease obligations and other real estate costs, $137 million in asset impairments, and $57 million in employee severance and other exit costs.

Costs related to exit and disposal activities under the Footprint Optimization Program for the three and six months ended February 28, 2025 were as follows (in millions):


Three months ended February 28, 2025	U.S. Retail Pharmacy		International		U.S. Healthcare		Corporate and Other		Walgreens Boots Alliance, Inc.
Lease obligations and other real estate costs 1	$	41	$	1	$	—	$	—	$	42
Asset impairments	13		(3)		—		—		10
Employee severance and other exit costs	16		—		—		—		16
Total pre-tax exit and disposal charges	$	70	$	(2)	$	—	$	—	$	68


Six months ended February 28, 2025	U.S. Retail Pharmacy		International		U.S. Healthcare		Corporate and Other		Walgreens Boots Alliance, Inc.
Lease obligations and other real estate costs 1	$	203	$	3	$	—	$	—	$	206
Asset impairments	139		(3)		1		—		137
Employee severance and other exit costs	50		1		3		3		57
Total pre-tax exit and disposal charges	$	392	$	1	$	4	$	3	$	400

1.Includes right-of-use asset impairments, certain expenses associated with closed stores and runoff costs associated with location optimization under prior exit and disposal programs.

The changes in liabilities and assets related to the exit and disposal activities under the Footprint Optimization Program include the following (in millions):


	Employee severance and other exit costs
Balance at August 31, 2024	$	—
Costs	57
Payments	(47)
Other	1
Balance at February 28, 2025	$	10

Other exit and disposal activities

During the six months ended February 28, 2025, VillageMD approved the closure of approximately 23 clinics and did not incur significant impairment charges.

During the three and six months ended February 29, 2024, VillageMD approved the closure of approximately 90 and 160 clinics, respectively. As a result, long-lived and intangible assets of $179 million and $303 million were impaired within the U.S. Healthcare segment, respectively. The impairment charges were recorded in Selling, general and administrative expenses primarily within the U.S. Healthcare segment in the Consolidated Condensed Statements of Earnings.

During the three months ended February 29, 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 Condensed Statements of Earnings.