The newly formed health care division of Walgreens Boots Alliance Inc. will be pulling in revenues of more than $1 billion per quarter once the Illinois-based company finalizes its investment in home and post-acute care provider CareCentrix this summer, CFO James Kehoe said Jan. 6.
Speaking to analysts and investors after reporting Walgreens Boots’ earnings for the company’s first fiscal quarter, Kehoe said the timeline of the $330 million investment that will give WBA a majority stake in Connecticut-based CareCentrix has been delayed by regulators taking more time than previously expected to grant approval. That, he added, should now come by the end of WBA’s third fiscal quarter in August and bring CareCentrix into a unit that also includes majority investments in primary care clinic operator VillageMD and specialty pharmacy Shields Health Solutions.
Combined, those ventures will have an annual revenue run rate of more than $4 billion and extend Walgreens’ core retail and pharmacy businesses into new markets, including via care management partnerships with insurers. Kehoe and WBA CEO Roz Brewer last month said they expect the health care group – which is close to welcoming its first dedicated leader – to be a $10 billion business by 2025.
In the company’s first quarter, the fledgling division posted an adjusted operating loss of $13 million on revenues of $51 million. Kehoe said Shields has been immediately accretive to WBA’s numbers, producing $10 million in adjusted operating profits about $25 million in revenue. Village lost about $3 million from its operations and will be dilutive to WBA’s bottom line this year, Kehoe added.
Since completing their investments in VillageMD and Shields late last year, WBA’s leaders have been stepping on the gas. Brewer said the company now has 81 VillageMD locations co-located at Walgreens stores, up from 55 in late November, and expects to open a new one every four to five days this calendar year. Similarly, the WBA team will add roughly one of its Health Corner concepts to a store every week this year; it finished November with 47 such locations.
Brewer and Kehoe have raised their full-year earnings estimates for WBA on the back of its Q1 results, which included same-store U.S. retail sales growth of 10.6 percent – the company’s fastest in more than two decades – and operating income of $1.4 billion. They now expect adjusted earnings per share to grow in the low- to mid-single digits versus their previous forecast of being flat from fiscal 2021. The new guidance includes the impact of pumping $120 million into higher employee pay to help attract and retain workers.
Shares of Walgreens Boots (Ticker: WBA) were down about 1.5% in midday trading Jan. 6. They have risen more than 10% over the past six months, growing the company’s market capitalization to about $46 billion.
