Dive Brief:
- Walgreens beat Wall Street expectations on earnings per share and revenue in its first quarter, as the pharmacy giant continues to push through “growing pains” amid its shift to healthcare services, according to CEO Tim Wentworth.
- The chain’s U.S. Healthcare segment posted sales of $1.9 billion compared with $989 million in the prior-year period, boosted by primary care chain VillageMD’s acquisition of Summit Health and growth in other business units. But the segment still reported a $96 million adjusted operating loss, compared with a $152 million loss last year.
- Walgreens is nearly halfway through its plan to close 60 VillageMD clinics as the provider focuses on density in “high opportunity” markets, Wentworth said during an earnings call.
Dive Insight:
The chain has been working to build its core pharmacy operations to deliver healthcare services for payer, provider and pharmaceutical clients.
But Walgreens hasn’t been able to drive profitability in the U.S. Healthcare unit — which includes businesses like VillageMD, at-home care provider CareCentrix and specialty pharmacy Shields Health Solutions — as quickly as the pharmacy giant expected.
Last quarter, Walgreens revealed a 2024 earnings outlook that was below analyst expectations and announced it would close 60 underperforming VillageMD clinics as it honed in on profitability in the healthcare segment. The company has now closed 27 clinics in “non-strategic” markets.
“I fully acknowledge the structural headwinds in our core pharmacy business and the growing pains in our healthcare segment,” said Wentworth, a former Cigna executive who recently took the reins as the pharmacy giant’s CEO. “I came to WBA eyes wide open, with a clear mandate to act with everything on the table in terms of putting our business on the right track.”
Still, Wentworth said the healthcare unit is making progress with profitability initiatives. VillageMD grew sales 14% during the first quarter, while Shields increased 27%, driven by new contracts and growth in existing deals.
The company’s relatively new clinical trials segment, which aims to enroll more patients in research, has signed more than 25 contracts, Wentworth said.
Going forward, the chain isn’t likely to invest in additional primary care assets, he added. But Walgreens may ink more partnerships, like its recent deal with Pearl Health that aims to help physicians manage value-based care arrangements.
“Village has certain geographies they’re very deep in, but there are geographies they're not in at all,” Wentworth said. “And there are large provider opportunities for us to partner in similar ways in those marketplaces, to grow our business and importantly help them grow theirs.”
