Walgreens shares surge as CEO Roz Brewer outlines plans to make health care its growth engine

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  • Walgreens Boots Alliance CEO Roz Brewer said the drugstore chain’s new health care division will accelerate growth.
  • The company plans to open hundreds of doctor offices, offer in-store consultations with nurses and pharmacists, and put a healthy spin on its front-of-store merchandise.
  • It acquired stakes in several health care companies, including the primary care company VillageMD.
  • Walgreens is expected to promote Covid-19 booster shots and its beauty brands, which are sold by other retailers including Walmart.

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Roz Brewer, the new CEO of Walgreens Boots Alliance, said Thursday that the drugstore chain will shift its focus to health care and turn it into the company’s “new growth engine.”

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At a virtual investor day, she said the company’s nearly 9,000 stores across the US would become places where customers can visit a doctor, get medical tests, and get advice from a nurse or pharmacist. Those services will be under a new division of the company called Walgreens Health.

“This new Walgreens Health will make a difference and it will begin to move us away from retail and just dispensing pharmaceuticals,” he said in an interview with CNBC’s Bertha Combs. “It will be about the lives we manage, and the lives we touch and the lives we can wrap therapists and healers in our buildings, both physically and digitally.”

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Investors appeared receptive to Walgreens’ plan. Shares rose nearly 9% on the Thursday after the virtual investor day. The shares have gained about 19 per cent so far this year.

Walgreens’ plan calls for opening hundreds of primary care clinics, shaking up its selection of storefront merchandise, and taking a stake in several health care companies.

boom in health services

It recently decided to invest an additional $5.2 billion in VillageMD, a primary care company that will run clinics inside Walgreens stores and is on track to go public in 2022. It has also acquired a majority stake in home health-care company, CareCentrix, and. Specialty pharmacy company, Shields Health Solutions.

Along with accelerating health care services, Walgreens will increase its cost savings target to $3.3 billion by 2024. Chief Financial Officer James Kehoe said it decided to increase that target after reducing costs by $2 billion.

Brewer stepped into Walgreens’ top leadership role in mid-March after serving as the chief operating officer of Starbucks and CEO of Walmart-owned Sam’s Club.

She said that for her, the health care mission is personal. On the company’s Investor Day, he recalled the final months of his mother’s life, when her family deferred medical bills, multiple doctors, and kidney dialysis appointments. The experience, she said, was “incredibly confusing and cumbersome and cumbersome.”

She said she distracted her family from what should have been focused on: enjoying the remaining time with her mother.

For so many Americans, she said it’s the same experience — and one that Walgreens aims to solve by weaving primary care with pharmacies and freeing up more time for staff to assist patients.

A new look and feel at the stores

Over the next few years, Walgreens leaders say consumers will begin to see and feel the difference when they visit one of the company’s nearly 9,000 U.S. stores.

Walgreens said it will have 85 primary care clinics in its stores by the end of the year. They will be under the name Village Medical at Walgreens. It plans to have at least 600 doctor offices in more than 30 US markets by 2025 and 1,000 by 2027. More than half of them will be in parts of the country that are medically under-served.

In some stores and online, it will add to Walgreens Health Corner. The in-store spaces will house medical professionals, such as nurses and pharmacists, who can consult with patients and help them manage chronic conditions.

Walgreens president John Standley said customers will be able to get other types of medical tests, such as pneumonia, strep, HIV and sexually transmitted infections. He said the company already has pilots in place, including a test pilot for HIV in two states, which is expected to grow to $26 million in revenue by fiscal year 2024.

Standley said that for pharmacists to answer customer questions, administer vaccinations and deliver other medical tests, Walgreens is opening centralized centers that fill prescriptions and deliver them to stores and people’s homes. It already has two centers open in Dallas and Phoenix and plans to open an additional nine by the end of fiscal year 2022, serving approximately 3,900 pharmacies.

In front of the store, the company’s wares will “have a more spin toward healthier for you,” Brewer said in a CNBC interview. Already, she said, Walgreens has seen consumers gravitate themselves toward supplements and beauty products with a wellness bent. She said it would add more private label products as well.

He said Walgreens would take a tough stance on tobacco sales. It has continued to sell cigarettes even after rival CVS Health abandoned the products in 2014.

With the strategy, Walgreens is following a similar path to rival CVS Health — but with one major caveat. CVS is also an insurance provider. It acquired Aetna in 2018 in a merger for $69 billion.

CVS has expanded the health care services provided in drugstores by opening urgent care centers called MinuteClinics. It’s turning hundreds of its stores into healthhubs where people can meet therapists, attend a yoga class or get help managing their diabetes.

On Thursday, Kehoe said Walgreens’ lack of insurance company could work to its advantage. He added that the company is payer agnostic and completely focused on improving health outcomes. In addition, he said Walgreens will have full primary care clinics, not the more limited services that MinuteClinic offers.

So far, Walgreens has struck deals with Clover Health, a Medicare insurance start-up, and Blue Shield of California to provide health care services for its more than 2 million members.

Walgreens will also seek growth in other areas. In the United Kingdom, Boots stores are known for their wide selection of premium makeup and beauty brands. Kehoe said store traffic has risen again as the country lifts pandemic restrictions, making people more comfortable browsing the aisles and socializing.

Some of Walgreen’s beauty brands, No. 7 and Soap & Glory, are now carried by major US retailers including Target, Ulta Beauty and Walmart. Kehoe said those brands are currently a $750 million business and are expected to grow to $1 billion.

There is still more demand for the vaccine

The business of Covid-19 vaccines is expected to continue in the coming year. Walgreens produced 34.6 million vaccines in the fiscal year ended August 31. It administered 13.5 million in the fourth quarter – 21% of the total vaccines given.

Walgreens estimates it will deliver 25 million Covid vaccines in the coming fiscal year, as few people get booster shots and young children are expected to qualify for the shots.

But the company will have to navigate a laundry list of challenges currently facing retailers. These include increased shoplifting, labor shortages and supply-chain shocks related to the pandemic.

For example, Walgreens has closing five more locations in san francisco Because of organized retail theft. It recently announced plans to raise its minimum wage to $15 an hour by November 22 to keep up with other retailers that have raised wages or jeopardized it.

Kehoe said the company is operating in the company’s health care business at a time when there is a “war for talent.” He added that, however, Walgreens has an easier time hiring medical professionals who are learning about the company and “believing in the vision.”


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