- Shares decline 3.5 percent, reach lowest price in a month
- Firings come after drug distributor lost key customeres
McKesson Corp. shares fell after the drug distributor said Wednesday night that it will fire 1,600 people, or about 4 percent of its U.S. workforce, to cut costs after losing some key customers.
On Thursday, the shares dropped 3.5 percent to $150.53 at 10:42 a.m. in New York. The shares have lost 32 percent in the past 12 months, as of Wednesday’s close.
The company began a strategic review in January and determined that “reductions to our workforce would be necessary to align our cost structure with our business needs,” according to an e-mailed statement. San Francisco-based McKesson began telling workers about the firings in mid-March, the company said in the statement.
“The transition that the company is going through operationally is a bit painful, but necessary to maintain the company’s leadership position in the global wholesaling market,” said David Francis, an analyst with RBC Capital Markets. He has a neutral rating on the stock.
McKesson’s business has been hurt by the expiration of a contract with Optum, a unit of UnitedHealth Group Inc., and changes in contracts with Omnicare Inc., a provider of pharmaceuticals to nursing homes and assisted living facilities, and Target Corp. A slowdown in price increases on generic drugs also hurt operating profit in the second half of the current fiscal year, McKesson said in January. In addition, Rite Aid Corp., which McKesson has a deal with to distribute drugs, is being bought by Walgreens Boots Alliance Inc., which works with one of McKesson’s competitors.
The company has been making acquisitions to boost growth. McKesson purchased Rexall Health, Canada’s No. 2 drugstore chain, for $2.23 billion in early March, and bought two oncology companies in February for $1.2 billion.