Walgreens will shutter about 40% of the clinics in its stores as the drugstore chain cuts costs and shifts to other businesses it believes will draw more people through its doors.
The company said Monday that it will close 157 Walgreens-run clinics by the end of the year, but it will keep open more than 220 that are run in partnership with health care providers.
"We've taken the decision to exit our wholly-owned, loss-making clinics, but we will continue to work with our local health system partners," co-chief operating officer Alex Gourlay said on a conference call with analysts.
Drugstore chains like Walgreens started years ago adding small clinics that dole out flu shots and handle relatively minor health issues like sinus infections. But analysts say the chains have struggled to make money off the clinics, which face growing competition from telemedicine services that allow customers to get care through their smartphones.
Walgreens has been focusing more on testing primary care clinics, which offer more extensive care, connected to some of its stores in Kansas City and Houston.
As rival CVS Health Corp. has leaned into offering in-store health services, Walgreens has announced partnerships with delivery service FedEx Corp. and with grocery company Kroger Co. to improve its food offerings.
Walgreens said Monday it will offer Jenny Craig meal-planning and weight-loss consultations at 100 locations starting in January 2020.
Under an existing deal with medical-testing company LabCorp, customers will be able to get blood and other lab tests in at least 600 Walgreens stores in the next few years.
Edward Jones analyst John Boylan said the closing of the clinics is immaterial to the company financially, and he expects the services Walgreens offers at its stores to shift over time.
Walgreens Boots Alliance Inc. runs more than 18,750 stores internationally. That includes 9,277 in the United States, Puerto Rico and the U.S. Virgin Islands.
It has been trimming its total as part of a plan to cut costs.
Drugstores also face competition in areas outside their pharmacies from online options like Amazon.com.
Walgreens said Monday that it has raised its annual savings target from its cost cutting program to $1.8 billion by fiscal 2022, up from a previous goal to exceed $1.5 billion.
In the final quarter of fiscal 2019, Walgreens earnings tumbled 55% to $677 million, due in part to charges from its cost-cutting program. Adjusted results totaled $1.43 per share.
Revenue climbed 1.5% to $33.95 billion.
The results surpassed Wall Street expectations. Analysts expected, on average, earnings of $1.41 per share on $33.86 billion in revenue, according to Zacks Investment Research.
Boylan termed the quarter good but not great. He said in a research note that Walgreens sales turned out better than expected, and that should continue.
The analyst said he expects Walgreens to expand its business as health plans narrow the network of pharmacies they cover in exchange for a break on pharmacy costs.
Shares of Deerfield, Ill.-based Walgreens rose $0.38 to $55.80 in Monday trading.
The stock had dropped 19% since the beginning of the year as of Friday's close. Meanwhile, the Dow Jones industrial average, of which Walgreens is a component, has climbed nearly 16%.
Information for this article was contributed by Tom Murphy of The Associated Press and by Robert Langreth of Bloomberg News.
Business on 10/29/2019