Walgreens is exploding plans to raise attention to medical services

Rosalind Brewer, new CEO of the Walgreens Boots Alliance, said Thursday that drugstore chains will focus on healthcare and turn it into the company’s “new growth engine.”

On Virtual Investor Day, she said about 9,000 stores across the United States will be places where customers can see doctors, get medical tests, and seek advice from nurses and pharmacists. .. These services will be under a new division of a company called Walgreens Health.

“This new Walgreens health makes a difference and begins to change us from retail to pharmaceutical dispensing only,” she said in an interview with CNBC’s Bertha Coombs. “It’s about the lives we manage, the lives we touch, and the lives that allow doctors and clinicians to be physically and digitally wrapped in our buildings.”

Investors seemed to accept Walgreens’ plans. After Virtual Investor Day, Thursday’s share price rose nearly 9%. So far this year, the market share has risen almost 19%.

Brian Tankilt, a equity research analyst at Jeffreys, said Walgreens did what many investors wanted on Thursday by explaining how to become an active healthcare player.

“Now people are saying,’It’s a healthy strategy and we’ll give you a little credit for it,'” he said.

Walgreens plans to open hundreds of primary care clinics, shake over-the-counter product choices, and seek to invest in several healthcare companies.

The company hopes that strategy will be rewarded in the coming years. Next year, adjusted earnings per share are expected to show flat growth on a constant currency basis, he said. However, growth is accelerating and adjusted earnings per share will increase by approximately 4% each year over the next three years. Starting in 2024, the company’s growth algorithm will increase adjusted earnings per share by 11% to 13%.

Brewer pointed out the company’s fourth-quarter earnings as evidence that Walgreens is built on a solid foundation.

Tanquilut said Walgreens’ new vision is a notable point.

“You have a pharmacy as a health center,” he said. “Instead of focusing on retail, value drivers are no longer driving scripts [prescriptions] From the pharmacy. It’s really about providing care and keeping patients loyal to the store. “

Strengthening medical services

Recently, it has decided to operate a clinic in Walgreens stores and invest an additional $ 5.2 billion in Village MD, a primary care company scheduled to open in 2022. We also acquired a majority stake in Care Centrix, a home healthcare company. Shields Health Solutions, a specialized pharmacy company.

Walgreens plans to raise its cost savings target to $ 3.3 billion by 2024, in addition to strengthening its healthcare services. After cutting costs by $ 2 billion, he decided to raise that goal, said James Kehoe, chief financial officer.

Brewer joined Walgreens’ top leadership role in mid-March after serving as Chief Operating Officer of Starbucks and CEO of Wal-Mart-owned Sam’s Club.

She said the health care mission was personal for her. On Company Investor Day, she remembered the last few months of her mother’s life. Her family managed to manage medical expenses, numerous doctors, and kidney dialysis appointments. According to her, the experience is “incredibly confusing, awkward, and burdensome.”

She said she distracted from what her family should have focused on: enjoying the rest of the time she spent with her mother.

For so many Americans, it’s the same experience, and Walgreens aims to solve it by combining primary care and pharmacies and freeing up more employees’ time to help patients, she said. Told.

Store new look and feel

Over the next few years, Walgreens leaders say consumers will begin to see and feel the difference when they step into a nearby store.

Walgreens said it will have 85 primary care clinics in its stores by the end of the year. They are called Walgreens Village Medical. We plan to have at least 600 clinics in more than 30 US markets by 2025 and 1,000 clinics by 2027. More than half of them are in some countries that are not medically adequately serviced.

Walgreens Health Corners will be added at some stores and online. Medical specialists such as nurses and pharmacists are assigned to the space inside the store to consult with patients and support the management of chronic diseases.

So far, Walgreens has opened 40 of them. By the end of this fiscal year, we plan to have more than 100 stores, and eventually more than 3,000 stores in all stores.

According to Walgreens president John Standley, customers can undergo other types of medical tests such as pneumonia, streptococcus, HIV, and sexually transmitted diseases. He said the company already has pilots and expects to grow to $ 26 million in revenue by fiscal year 2024, including HIV test pilots in two states.

To free up time for pharmacists to answer customer questions, vaccinate, and perform other medical tests, Walgreens opens a centralized center to prescribe and ship to stores and people’s homes. That’s what Standley said. Two centers have already been opened in Dallas and Phoenix, and nine more will be opened by the end of 2022. This brings the number of pharmacies to about 3,900.

In an interview with CNBC, Brewer said in front of the store that the company’s products “spin further towards health for you.” Already, Walgreens has seen consumers attract themselves to health-defying supplements and beauty products. She said it would also add more home-branded products.

She said Walgreens would scrutinize tobacco sales. Tobacco continues to be sold after rival CVS Health dropped the product in 2014.

With this strategy, Walgreens follows the same path as its rival CVS Health, but with a few caveats. CVS is also an insurance company. In 2018, we acquired Aetna in a $ 69 billion merger. He also owns Caremark, one of the largest pharmacy benefit managers.

CVS has expanded the medical services it offers at drugstores by opening an emergency medical center called Minute Clinics. Turn hundreds of stores into Health Hubs, meet therapists, attend yoga classes, and help manage your diabetes.

Jefferies’ Tanquilut said CVS has a more comprehensive health strategy with Caremark, Aetna, and their stores. He said it would lead to natural synergies, such as encouraging Etna members to go to the Minute Clinic for flu shots and emergency treatment. In addition, CVS has the “starter advantage” of turning stores into health care destinations, he said.

He has a hold rating on Walgreens stocks with a price target of $ 53, which is about 5% above where the stocks are currently traded. He has a purchase rating for CVS shares, with a price target of $ 95, which is about 12% higher than where the shares are currently traded.

On Thursday, Kehoe said the lack of Walgreens insurers could help with its benefits. He said the company is payer-agnostic and focused on improving health. In addition, Walgreens has a full-fledged primary care clinic rather than the more limited services offered by Minute Clinic.

So far, Walgreens has signed deals with Medicare Insurance startup Clover Health and Blue Shield, California, to provide healthcare services to more than 2 million members.

Walgreens expects growth in other areas as well. In the UK, boot stores have become known for their wide selection of premium makeup and beauty brands. Kehoe said the country lifted the pandemic restrictions, which again increased traffic in stores, making it more comfortable for people to browse and interact with aisles.

Some of Walgreens’ beauty brands, No. 7 and Soap & Glory, are currently sold by major US retailers such as Target, Ulta Beauty and Walmart. These brands are currently a $ 750 million business and are expected to grow to $ 1 billion, Kehoe said.

More vaccine demand is still ahead

The Covid-19 vaccine is expected to continue to drive the business next year. Walgreens received 34.6 million vaccines in the fiscal year ended August 31st. In the fourth quarter, 13.5 million were administered. This accounts for 21% of all vaccines administered.

Walgreens predicts that it will receive 25 million Covid vaccines next year, as some people will get booster shots and young children are expected to qualify for the shots.

However, the company needs to navigate the laundry list of the challenges retailers are currently facing. This includes increased shoplifting, labor shortages, and pandemic-related supply chain growls.

Walgreens, for example, has closed five more locations in San Francisco due to systematic retail theft. Recently, it announced plans to raise the minimum wage to $ 15 per hour by November 22 to catch up with other retailers who have raised wages or hung benefits.

Kehoe said the company is staffing its healthcare business during a “war for talent.” But Walgreens has made it easier to learn about the company and hire medical professionals who “believe in the vision,” he said.

Walgreens is exploding plans to raise attention to medical services

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