FOR IMMEDIATE RELEASE: Dec. 18, 2024

CONTACT: Carter Dougherty, carter@ourfinancialsecurity.org 

Prospect of Walgreens Acquisition by Sycamore Bodes Ill for Retailer

The possible acquisition of drugstore chain Walgreens risks writing a new chapter in the long-running saga of private equity’s looting of the American retail sector, a trend that has caused the loss of over half a million jobs, numerous bankruptcies, and extensive consolidation that leads to higher prices, lower quality for consumers, and more precarious conditions for workers.

Walgreens is now in talks with Sycamore Partners about a leveraged buyout, though no purchase agreement has been finalized.

“Sycamore’s strategy in the retail sector is typical of private equity’s business model, a large part of which is outright looting its acquired companies,” said Aliya Sabharwal, private equity senior campaigns manager. “Whether it’s slashing jobs and closing stores, selling off valuable assets, or paying itself huge dividends, Sycamore’s approach is bad for workers and retail in general, even as it generates enormous profits for wealthy executives.”

Historically, Sycamore acquisitions:

• Result in significant job losses and store closures, which AFR documented in a report on the retail sector and private equity. Sycamore-owned retailers shed more than 25,000 jobs, including the 11,600 jobs that were eliminated from the Aeropostale bankruptcy, and closed several hundred stores before the pandemic.
• Lead to extensive workplace violations, as detailed by Good Jobs First.
• Demand the sale of valuable assets, notably real estate, that can help retailers survive phases of soft sales. Walgreens, for example, owns nearly 260 locations (of more than 8,500) giving Sycamore a chance to use the sale-leasback technique to extract cash.
• Involve the use of other Sycamore companies to act as middlemen between the acquired company and suppliers, often draining cash as the retailer fails.
• Use financial engineering, to extract dividends from retailers who are already short on cash. After taking over office retailer Staples for $7 billion in 2017, Sycamore issued $5.4 billion in debt two years later, both to refinance its existing debt and pay itself a $1 billion dividend. It closed over 100 stores and laid off more than 7,000 workers.
• Have gone badly enough that Sycamore often gets mentioned as a profiteer in the so-called “retail apocalypse.” It lost a bid to take over J.C. Penny, for example, when it refused to commit to investing in the business.

“Sycamore shows no signs that it takes seriously the task of running retail companies,” Sabharwal added. “Instead, Sycamore seems to focus intensively on extracting value from its acquisitions and then dumping them as quickly as possible.”

A Sycamore takeover of Wallgreen’s would give the private equity firm more power over retail workers. Sycamore Partners owns a broad portfolio of retail chains including Ann Taylor, Belk, Hot Topic, Lane Bryant, Loft, Staples, Talbots, and The Limited. This gives the private equity firm power to push down on the wages, benefits, schedules, and workplace conditions of retail workers — predominantly low-wage Black and Latine women.

“This broad portfolio creates a center of gravity that can drag down retail workers’ wages and result in bad working conditions,” said Patrick Woodall, managing director for policy at AFR. “It would give the firm the ability to curtail job switching through blacklists and antipoach requirements at its own portfolio firms.”

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