Walgreens Boots Alliance (Nasdaq: WBA) remains committed to its growth strategy, one that includes the continued incorporation of home-based care.
The company is focused particularly on tech enablement, an area where it hopes to make an acquisition this year, Walgreens CEO Roz Brewer said during an earnings call Thursday..
However, one plan for accessing more capital has been backburnered.
The company’s plans to sell its Boots pharmacies in the U.K. had been shelved — for the time being — due to market conditions, Brewer said.
“We gained early, high interest at the very beginning of these discussions back in January,” she said. “We started off with roughly about eight to 10 interested parties in the Boots business. We had very productive discussions and got into a detailed due diligence just as the market began to turn on us. There was such an unexpected and dramatic change so as a result, we made this decision to slow this opportunity down.”
Walgreens still sees itself at the forefront of health care’s transformation in the U.S., Brewer said.
Sales for VillageMD – the home-focused primary care provider – increased nearly 70% year over year to more than $511 million, a bright spot in the company’s earnings call.
Walgreens and VillageMD have continued their rollout of co-located clinics, with 120 now open. They are on pace to hit 200 by the end of 2022, and the plan is to open 1,000 in five years.
Some of that inorganic growth that Brewer mentioned might be tougher to create now that the Boots UK sale is off the table for now, however.
The financial investment firm Jefferies Group wrote in its summary of WBA’s call that Boots was set to be a positive catalyst for Walgreens when it was ready to further invest capital into its Walgreens Health arm.
Walgreens not offloading Boots in the near-term future means there will be less fuel and capital to grow for now.
However, the news that WBA will keep Boots in its portfolio is not an indication that the company is pulling back from its plan to push further into home-focused care. In fact, it’s prioritizing that over earnings.
WBA’s investment in expanding VillageMD’s clinic base is forcing earnings to lag. Usually, an aggressive clinic expansion like the one Walgreens is putting together comes with several years of operating losses.
Nonetheless, Brewer said the company is committed to investing in Walgreens Health now and in the future.
“It’s important to state that we are going to stay bullish about moving forward on Walgreens Health and making sure that our investments are prioritized in that direction,” she said. “We’ve seen good success in terms of the initial investments that we’ve made there. We feel like we’re on a good trajectory.”
Overall, its revenue exceeded projections, but the company’s revenue dropped by about 4% from the previous quarter.
Walgreens Health actually helped Walgreens Boots Alliance offset a slump in retail pharmacy sales as demand for the COVID-19 vaccine slowed. The company reported net income of $289 million, down nearly 74% compared to $1.2 billion during the same period last year.