Research Update: Walgreens Boots Alliance Inc. Downgraded To 'BB' On Operating Difficulty; Outlook Negative

Walgreens Boots Alliance Inc. recently reported third-quarter results for the period ended May 31, 2024 and fiscal 2025 guidance notably below our expectations. We believe material strategic changes, limited cash flow generation, and large maturities in coming years are key risks to the business. Therefore, we lowered our ratings on Walgreens two notches to 'BB' from 'BBB-', putting it in the speculative-grade category. We lowered our rating on the company's commercial paper to 'B' from 'A-3'. We assigned a '3' recovery rating and lowered the issue-level rating to 'BB' from 'BBB-' for all unsecured notes at both Walgreens Boots Alliance and Walgreen Co., reflecting our expectation for meaningful (50%-70%; rounded estimate: 65%) recovery in the event of default. We do

...- Walgreens Boots Alliance Inc. recently reported third-quarter results for the period ended May 31, 2024 and fiscal 2025 guidance notably below our expectations. - We believe material strategic changes, limited cash flow generation, and large maturities in coming years are key risks to the business. - Therefore, we lowered our ratings on Walgreens two notches to '##' from '###-', putting it in the speculative-grade category. - We lowered our rating on the company's commercial paper to 'B' from 'A-3'. - We assigned a '3' recovery rating and lowered the issue-level rating to '##' from '###-' for all unsecured notes at both Walgreens Boots Alliance and Walgreen Co., reflecting our expectation for meaningful (50%-70%; rounded estimate: 65%) recovery in the event of default. - We do not rate the company's delayed draw term loans or cash flow revolvers. - The negative outlook reflects our view that Walgreens is seeing pressure on both its pharmacy and retail segments and both new and existing...

Research Update