Walgreens Boots Alliance is considering a sale to private equity firm Sycamore Partners, highlighting the ongoing challenges faced by the retail pharmacy giant.

Walgreens Boots Alliance, the American pharmacy chain known for its 12,500 stores across the US, Europe, and Latin America, is in advanced talks to be sold to private equity firm Sycamore Partners. The move underscores the growing pressure on the retail pharmacy sector as high inflation, increased competition, and changing consumer spending habits take a toll on traditional retailers.

Once valued at $106 billion in 2015, Walgreens’ stock has plummeted in recent years, now hovering around a mere $8 billion. The company has seen a dramatic decline, with a reported net loss of nearly $9 billion for its 2024 fiscal year. These financial struggles, combined with rising operational costs and fierce competition from online giants like Amazon, have prompted Walgreens to rethink its future.

In response to these pressures, the company announced plans to close 1,200 stores in the coming years. This move aims to streamline its operations and focus on its most profitable markets. Despite efforts to revive the brand under new CEO Tim Wentworth, who took the helm in 2023, Walgreens has struggled to recover from a sharp decline in stock value and a series of unsuccessful acquisitions, including the purchase of healthcare providers Summit Health-CityMD and CareCentrix.

The potential sale to Sycamore Partners marks a significant shift for Walgreens, which for decades operated as a publicly traded company. Sycamore Partners, a private equity firm that has built a reputation for acquiring distressed retailers, is now in discussions to buy the pharmacy chain, although it would likely require outside investors to fund the deal. Analysts predict that if the transaction proceeds, Sycamore may restructure Walgreens in ways that would be difficult under the scrutiny of public markets.

The stakes are high for Sycamore, which manages approximately $10 billion. The firm is no stranger to distressed acquisitions; it has previously purchased well-known retail brands such as Staples and Hot Topic. However, this deal would represent a far larger investment. The discussions also highlight the shifting landscape for US retail pharmacies, where Walgreens is facing increasing pressure not only from online retailers but also from its competitors in the traditional retail space, such as CVS Health and Rite Aid.

Walgreens has also been grappling with the rise of healthcare providers like Amazon, which has expanded its footprint in the pharmacy business, and big-box retailers like Target, which have aggressively entered the pharmaceutical market. This fierce competition has forced Walgreens to focus on its US operations and consider a possible sale of its UK-based Boots division. The Boots brand, which Walgreens acquired in 2012, has been under review as the company looks for ways to regain its financial footing.

The talks with Sycamore come after years of trying to revitalise the business. Walgreens first attempted to sell Boots in 2019 when it received a $70 billion offer from private equity giant KKR. However, the deal fell through, and since then, Walgreens has been looking for other ways to remain competitive in a rapidly evolving industry.

Sycamore’s potential acquisition of Walgreens would be a bold move, with the firm possibly restructuring the company away from the public eye, making it easier to implement the necessary changes. Analysts speculate that the company might be broken up into separate units, or it could remain intact under Sycamore’s ownership.

While both Walgreens and Sycamore Partners have declined to comment on the negotiations, the talks reflect the deepening challenges facing retail pharmacies. With companies like Rite Aid already filing for bankruptcy protection and CVS expanding into health insurance, the future of traditional pharmacy chains remains uncertain. Walgreens must now make crucial decisions about its future in a changing market.