Population Health Management

Walgreens CEO: Health Investment Plans Not Derailed by Abandonment of Boots Sale

June 30, 2022

Roz Brewer told analysts her team could look to sell other parts of the company’s portfolio to fund growth at the new division.

Geert De Lombaerde

The leaders of Walgreens Boots Alliance said June 30 their ambitious push into healthcare services will not be pushed off course by their recent decision to not sell the company’s Boots division in the United Kingdom.

Speaking to analysts after Illinois-based Walgreens reported fiscal Q3 results, CEO Roz Brewer said Walgreens Health, which comprises the company’s investments in VillageMD and Shields Health Solutions among others, will continue to receive the funds it needs to realize its growth plans. That could include, she suggested, money brought in through the potential sales of other parts of Walgreens’ portfolio of holdings.

“We are going to stay bullish about moving forward on Walgreens Health and making sure that our investments are prioritized in that direction,” Brewer said. “We feel like we’re on a good trajectory.”

That trajectory, Brewer added, will include more acquisitions to go with her team’s planned purchase of post-acute care venture CareCentrix, the timeline for which has been pushed back a second time and is now expected to be completed this fall. A particular area of focus, she said, is technology to link up the different parts of Walgreens Health.

Walgreens Health, which was formed last fall and which Brewer and CFO James Kehoe have said is aiming to be a $10 billion by 2025, booked $596 million in sales in the three months ended May 31, up from $527 million in the previous quarter. Its operating loss grew to $234 million from $212 million early this year as execs plowed money into new VillageMD clinics.

Kehoe told analysts the profit drag from Walgreens Health will soon begin to be “much lower.” Newly opened VillageMD clinics – the company’s footprint now spans about 315 clinics, up more than 40 percent from last summer – typically begin producing a profit in their third year of operations, he said, after losing about $600,000 in their first year and another $200,000 to $300,000 in Year 2. In Walgreens’ fiscal 2023, Walgreens Health will hurt its parent’s earnings per share by one to two percentage points versus six points this fiscal year, he added.

As a whole, Walgreens posted adjusting operating profits of $955 million in its third fiscal quarter, down from more than $1.4 billion a year earlier. The results were hurt both by the company’s settlement with Florida related to its opioid distribution practices as well as a drop in sales at its AllianceRx Walgreens home delivery and specialty pharmacy unit. Shares of the company (Ticker: WBA) were down about 5 percent in midday trading and have lost more than 25 percent of their value so far this year.