According to an April 4 report in the online publication Digital Commerce 360, the Deerfield, Illinois-based Walgreens Boots Alliance, Inc. is planning to invest up to $300 million in digital commerce and e-healthcare, even as the company’s overall earnings for the second quarter of 2019 have proven disappointing to investors.
Referring to the earnings call Tuesday, April 2 that CEO Stefano Pessina conducted, in which he announced growth in total sales year over year 4.5% to $34.50 billion from $33.02 billion, but with net earnings dropping to $1.156 billion from $1.349 billion, Digital Commerce 360’s Mark Brohan wrote that, “On the call Pessina and other Walgreens executives made it clear that Walgreens, while looking to cut its annual operating expenses annually by up to $1.5 billion—including between $500 million and $600 million for information technology—is putting a priority on rolling out a more aggressive approach to ecommerce and digital healthcare.”
Brohan noted that, “Despite cost-cutting measures, Walgreens could spend as much as $300 million on various initiatives related to digital healthcare,” quoting Walgreens chief financial services officer James Kehoe as telling analysts that “We will be putting in $300 million to boost the partnerships and to boost our capabilities on digitalization of the company,” based on an earnings call transcript from SeekingAlpha.com.
In January, Walgreens announced it would begin working with Microsoft to design new “digital health corners” for its stores, beginning with a 12-store pilot project this year. As part of the deal, Walgreens will begin using Microsoft’s Azure cloud-computing software, moving applications and data to retailers’ data centers, the companies said. And Brohan quoted Walgreens president and co-chief operating officer Alex Gourlay as telling analysts, “The partnership with Microsoft is a clear acceleration of the digitalization of our company along with recruiting internally a lot of (people), particularly a chief digital officer. And there’s more people coming in to really drive the modernization of our platform and processes to become a new retail and healthcare company.”
Meanwhile, an April 2 article by the staff of Drug Store News reported that, “With regard to its U.S. retail pharmacy segment, Gourlay noted that the company is focusing on several areas including partnership, digitalization and efforts to revamp its pharmacy and retail approach. Organizationally, Gourlay said he had reorganized his senior leadership team in a way that delineates between development and delivery,” the Drug Store News report stated. “Within pharmacy, he said this has create teams to partner with payers while others look to focus on operational effectiveness and outcomes-based reimbursement—an area he said the company made strides in during Q2. The company also is shifting its retail approach.”
All of this follows upon the announcement that Walgreens and Microsoft executives made on January 15. As Managing Editor Rajiv Leventhal noted in a report on that date, “Walgreens Boots Alliance Inc. and Microsoft Corp. are joining forces on a major seven-year healthcare partnership that will aim to ‘deliver innovative platforms that enable next-generation health networks, integrated digital-physical experiences and care management solutions.’ The companies announced today,” Leventhal wrote on Jan. 15, “that they will combine the power of Microsoft Azure, Microsoft’s cloud and AI (artificial intelligence) platform, healthcare investments, and new retail solutions with WBA’s customer reach, volume of locations, and outpatient healthcare services to accomplish their goals: to make healthcare delivery more personal, affordable and accessible.”
Walgreens is not alone in planning significant investments in digital health. As Digital Commerce 360’s Brohan noted in a Feb. 25 article that, this year, “CVS will spend between $325 million and $350 million on various types of technology as it aims to transform a network of about 9,700 stores into healthcare shopping and services facilities.” Brohan reported on that date that CVS executive vice president and chief financial officer Eva Boratto had told Wall Street analysts during a Feb. 20 earnings call that “Investments are being made to further our analytics and digital capabilities, develop new programs such as chronic kidney care, and enhance Aetna’s clinical platform. We expect our incremental investment spending to be between $325 million and $350 million in 2019,” Boratto told analysts on Feb. 20.
