Dive Brief:
- Walgreens chief financial officer James Kehoe will leave the company in mid-August, the Illinois-based company announced Thursday.
- SVP and global controller Manmohan Mahajan has been named interim CFO while Walgreens searches for a permanent replacement. Part of Walgreens’ search criteria is an executive with healthcare experience, according to a press release on the transition.
- Kehoe’s departure comes as recent financial results for Walgreens, which is working to transition from a pharmacy chain to a healthcare services company, have underperformed market expectations.
Dive Insight:
TD Cowen analyst Charles Rhyee said the transition isn’t surprising, following Walgreens’ “recent string of disappointing results.”
The macro environment has been a factor, but a portion of the issue has been Walgreens not setting achievable targets, which has affected investor confidence, according to Rhyee.
Walgreens missed Wall Street expectations and cut its 2023 outlook in third quarter earnings reported in June. That’s after the retailer reported a $3 billion net loss for the first six months of its 2023 fiscal year, compared with net earnings of $4.5 billion in the first half of 2022.
Walgreens has been steadily expanding its healthcare offerings as it looks to compete against more vertically integrated rivals like CVS Health.
Its growing U.S. Healthcare segment has proved a financial bright spot for the company, boosting Walgreens’ topline to $35.4 billion in the third quarter.
“Overall, we continue to believe in the strategy to transition from a drug retailer into a healthcare services company,” Rhyee said, noting Walgreens has acquired a number of “attractive” assets in working towards that goal.
VillageMD, a primary care provider majority owned by Walgreens, acquired a Connecticut medical group in March, building on its earlier purchase of provider group Summit Health, the parent company of CityMD.
Walgreens also bought the remaining stake in post-acute and home care services provider CareCentrix in October.
Kehoe is leaving “to pursue an opportunity in the technology sector,” according to the release.
His replacement, Mahajan, has held senior finance roles at Walgreens since 2016.
