CONSUMER STAPLES
- 25% of US retail pharmacy stores (that are unprofitable) are under review - does not mean all will be closed and cash impact is still unclear with US stores tending to be under 10-25yr leases (source: filings). All it's given for now is that leases is part of the cost analysis on closures and net closures will be cash flow and EPS accretive.
- Boots spin-off/IPO is off (group has built a 25% EBIT reliance on it through all this) but Village MD stake will be evaluated. How much it will get for the latter is unclear, its recorded large impairments against it recently (2Q).
- FY25 consensus EBIT estimates have fallen 30% since earnings to $2.3b. FCF expectations are sitting in low $1b handle. There remains high uncertainty on FY25.
Operating cash flows, even with a complete divvy cut, look to be short of generating the ~$6b due over the next 2 years. It leaves Village MD stake and any other cash generating cost cutting activates in the driving seat for shoring up liquidity. Moody's double notch downgrade and below moves will cause a near doubling in interest cost if it refi's the legacy bonds - though that won't be '26 bondholders concern.
- £25s +8
- $26s +44
- €26s +100
- $30s +110
- $44s +40
- Equities -25%, CDS +100
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