Walgreens is closing dozens of its VillageMD health clinics to cut costs.
Walgreens Boots Alliance is looking to cut at least $1 billion in costs in 2024.
As part of its cost-saving strategy, the pharmacy giant and health care services company plans to close approximately 60 VIllageMD clinics, exiting five markets, executives said on the company’s fouth-quarter earnings call. The sites are at or adjacent to Walgreens stores.
In late 2021, Walgreens invested $5.2 billion in VillageMD, increasing its ownership stake in the company from 30% to 63%.
“We believe that we can best enhance VillageMD growth and value by focusing on increased density in our highest opportunity markets and expanding integration of our digital assets,” John Driscoll, president, U.S. Healthcare, told analysts on the call. “As we exit these nonstrategic markets, our long-term focus will be on achieving density in those regions with the greatest potential to drive future profitability growth and where we can best serve patients with our consolidated set of assets.”
In other moves, Walgreens is reducing SKUs and addressing slow-moving product categories.
“There is significant opportunity to reduce retail inventory and optimize our retail product mix,” interim CEO Ginger Graham said on the call. Graham will turn over the reins to incoming CEO Tim Wentworth on Oct. 23.
Graham added that Walgreens is reducing is capital expenditures in fiscal year 2024 compared to last year, down approximately $600 million.
Walgreens is reducing costs on the heels of a disappointing fourth quarter. The company reported a loss of $180 million, or $0.21 a share, for the quarter (ended Aug. 31), down from $415 million in the year-ago period.
For fiscal 2024, Walgreens expects adjusted earnings per share of $3.20 to $3.50, below Street estimates of $3.71. It expects revenue of $141 billion to $145 billion. Analysts were expecting sales of more than $144 billion. The company said it expects continuing lower COVID-related sales and a higher tax rate among other things to offset profit growth.