Walgreens Boots Alliance, Inc.

Overview Key strengths Key risks Solid market position as the world's largest drugstore chain based on number of stores. Acquisitive history and ambitious transformation strategy translate into potential event risk. Second-largest U.S. pharmacy ranked by prescription drug volume. Management?s plans for growth are in new and less familiar health care verticals. The company is refocusing and accelerating core retail pharmacy, digital, and health care strategies. General merchandise sales face intense competitive pressures from mass discounters and e-commerce retailers. That said, we expect the company to return to below 4x by our calculations in fiscal 2023, given its improving front-end store execution and rapid scaling of health care offerings. While COVID-19 vaccination and testing benefits will roll off partially, we still

...S&P Global Ratings' lease-adjusted leverage for Walgreens Boots Alliance Inc. was in the low-4x range at the end of fiscal-year 2022, slightly above our expectations for about 4x the full year. That said, we expect the company to return to below 4x by our calculations in fiscal 2023, given its improving front-end store execution and rapid scaling of health care offerings. While COVID-19 vaccination and testing benefits will roll off partially, we still expect strong free operating cash flow (FOCF) generation of $2.5 billion- $3.5 billion annually, stable operating margins, and more opportunities to expand from traditional pharmacy to broader community health care solutions. We note the expansion plans Walgreens envisions involve moving into more profitable and faster-growing segments, including primary care, home health, and specialty pharmacy....

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