Add geopolitical tensions to the list of worries weighing on Walgreens.
Mounting fears of a "hard" Brexit and an escalating tariff battle between the U.S. and China are compounding anxieties at the Deerfield, Ill.-based drugstore chain, which was already contending with a potential threat from Amazon and uncertainty about its future in a rapidly changing healthcare industry.
The combination of short- and long-term worries, along with disappointing financial results, has pushed Walgreens Boots Alliance shares down 23% this year.
"It's got to be an extremely difficult time to operate. The rules are shifting very rapidly," says Philip Levy, a professor at Northwestern University's Kellogg School of Management. "A hard Brexit has been the default ever since (Prime Minister) Theresa May launched Article 50. And if they don't get their act together, that's exactly where they are going."
The failure of Parliament to approve an exit agreement increases chances the U.K. will leave the European Union without a deal, potentially snarling cross-border trade and triggering a recession in the country. Both would hurt Walgreens, which does business across Europe and operates 2,485 Boots drugstores in the U.K.
Boots is already dealing with tight reimbursement rates under austerity measures enacted during the financial crisis of 2008, which led the U.K.'s National Health Service to reduce payments to pharmacies. Those cutbacks "continue to exert pressure on the pricing of and reimbursement timelines," Walgreens said in its recent annual report.
That could get much worse if a hard Brexit tanks the British economy and forces the NHS to squeeze harder. According to the Bank of England, a no-deal exit could cause the U.K. gross domestic product to plummet 8%, worse than the depths of the Great Recession.
"It's already a big problem; there isn't much money for the NHS. If that continues, it will make it much worse (for reimbursement rates)," says Lorand Bartels, an international trade expert at the University of Cambridge. "When it comes to buying medicine, the (NHS) basically have monopoly power. They say how much it will cost."
A Walgreens spokesman says "there are currently supply chain agreements in place for WBA (Walgreens Boots Alliance) which would not change upon Brexit. However, as the terms and conditions of Brexit are still being negotiated by the U.K. government and the European Union, it is not possible to predict the impact at this time."