Will fading COVID-19 vaccine demand hit Walgreens hard?
Are sales and earnings at Walgreens and the other major U.S. drugstore chains poised to get a lot healthier or are they going to take a turn for the worse? That question is front and center for investors and other stakeholders that have seen their results shift from bad to better since the novel coronavirus pandemic hit last year.
Walgreens’ third-quarter fiscal report describes to a business that saw an uptick in overall sales and improved earnings as Americans went to its stores to get vaccinated against COVID-19 and make other purchases. Same-store sales at the chain were up 6.4 percent year-over-year, with pharmacy revenues up 8.4 percent, including immunizations, and front-end retail up 1.7 percent.
The retailer received a boost from its role in the Biden administration’s national vaccination rollout. Walgreens, which has administered 25 million doses from its pharmacies and other vaccine sites, recently introduced a $25 myWalgreens gift card reward for individuals getting immunized. The New York Times reports that the rate of daily vaccinations across the country has fallen from a high of 3.38 million on April 13 to 870,000 at present.
The myWalgreens loyalty program is a key component of the drugstore’s plans for building its business. James Kehoe, CFO for Walgreens Boots Alliance, said on the chain’s third-quarter earnings call that memberships rose 34 percent from the previous quarter and that personalized offers were driving higher purchased numbers from members.
Walgreens partnership with VillageMD to open on-site clinics staffed by primary care physicians continued to be well received by patients, Mr. Kehoe told analysts. The two companies opened 46 new sites in the last quarter and expect to have 80 in operation by the end of the year.
“In addition to these physical co-locations, we formed an integrated virtual healthcare collaboration with VillageMD in an additional nine Walgreens locations,” Mr. Kehoe said. “This will give patients access for the same expanded pharmacy services that are available at the core locations.”
Walgreens is also focused on automating processes to improve health outcomes for its customers. The retailer opened two micro-fulfillment centers to support around 550 pharmacies in Dallas and Phoenix. The two centers are expected to eventually support around 1,000 Walgreens. The chain has identified nine other markets for micro-fulfillment facilities to be up and running by the end of 2022.
- Walgreens Boots Alliance Fiscal 2021 Third Quarter Results Exceed Expectations – Walgreens Boots Alliance
- Individuals Getting COVID-19 Vaccines at Walgreens to Receive $25 in Walgreens Cash Rewards – Walgreens
- Walgreens Boots Alliance Inc (WBA) Q3 2021 Earnings Call Transcript – The Motley Fool
- See How Vaccinations Are Going in Your County and State – The New York Times
- Will doctors prove a cure-all for Walgreens competitive ills? – RetailWire
DISCUSSION QUESTIONS: What challenges does Walgreens face going forward and does it have the right plan in place to achieve growth? What do you see as the most and least promising among the publicly-known initiatives being taken by Walgreens?