Walgreens estimates savings of $3.3B from its Transformational Cost Management program by 2024.
Though Walgreens is late to the whole-person healthcare game, the company is one step ahead of CVS by using Micro-Fulfillment Centers.
We discuss whether investors should add Walgreens stock now.
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Walgreens Boots Alliance, Inc. ( WBA ) offers specialty pharmacy and retail services in the US and globally. The US segment sells prescription drugs and beauty/personal care products at its drugstores while also offering mail services for online sales. As for the international segment, the company has optical practices on top of its existing pharmacy and retail services under the Boots branding. Furthermore, the company also has a wholesale and distribution business for pharmaceutical products in Germany. As of August 2021, Walgreens has 9K retail stores and 26K pharmacies within the US, and 4K overseas retail stores.
Since 2018, Walgreens has recorded more than $2B worth of cost savings from its Transformational Cost Management program. By 2024, the company aims to reach $3.3B savings to offset future inflation and expand the scope of its healthcare offerings. These investments aim to increase the cost-efficiency of its operations while providing personalized healthcare services within its drugstores. As a result of its long-term expansion, Walgreens projected an EPS growth at a CAGR of 4% over the next three years.
We discuss whether investors should add Walgreens stock now. Walgreens’ Personalised Healthcare Support
Since December 2018, Walgreens embarked on a Transformational Cost Management (‘TCM’) program and successfully exceeded its goal of $1B a year ahead of FY2022. These cost savings are to allow Walgreens to expand the scope and efficiency of its healthcare offerings , such as: VillageMD, to create a healthcare one-stop-shop for primary-care services
Walgreens Health Corners, to provide personalized healthcare services
Walgreens Micro-Fulfillment Centers, to increase the cost-efficiency of its inventory management. Rosalind Brewer, CEO of Walgreens, added:
We’re ready to bring about healthcare that means lower costs for our customers, better outcomes, more convenience, equitable access for all. … being there for communities where we live and serve, because we’ve invested in our future. And partnering with others who share our volumes, and our commitment to do what’s right. Now, we are reimagining healthcare for our customers for the next era.” ( Q4 2021 Earnings Call ) The company estimated a valuation of $21B for Walgreens’ recent investments into VillageMD, Shields, CareCentrix NIA, AmerisourceBergen, and Option Care. With these sizeable investments, Walgreens aims for a successful launch of its new Walgreens Health segment. Walgreens and VillageMD Location. Source: Walgreens.
Since 2019, Walgreens has heavily invested in VillageMD as part of its expansion plan. As of October 2021, Walgreens announced it is the majority shareholder of VillageMD . The company plans to open 1K new primary-care clinics next to its pharmacies by 2027, as healthcare destinations, similar to CVS and its MinuteClinic. Furthermore, both physicians and pharmacists can access the same healthcare platform for medical and prescription records. Patients will also have the choice of virtual visits for non-urgent medical services. Currently, Walgreens and VillageMD already have 52 locations, with 33 planned by the end of FY2021. This complementary investment will help to create a synergy between Walgreens and VillageMD while boosting its long-term revenue moving forward. Brewer added: We built co-located clinics at many Walgreens locations and have continued to learn while we did. And there are great opportunities to bring the physician and pharmacists together to improve overall care. One thing that is very important to VillageMD … is that they are focused on all patient populations. Medicare, Medicare Advantage, Medicaid, commercial, and the uninsured. This was a really important aspect for us since it allows us to serve patients across their life journeys. ( Q4 2021 Earnings Call ) Walgreens Health Corners. Source: Walgreens
Since February 2020, Walgreens has also created the Walgreens Health Corners within 40 of its drugstores . Pharmacists and nurses will help develop personalized in-person and online healthcare services for consumers, especially those with chronic conditions. Walgreens reported 35M chronic patients amongst its members, who account for 84% of its revenues. Not only will it increase the relevance of Walgreens among its existing consumers, but the online service will also bridge the gap for those patients seeking post-hospitalization care. Brewer emphasized: Leveraging the community presence of Walgreens […]