DEERFIELD, Ill. — Walgreens will close 157 of its retail clinics by the end of the year as it focuses on cutting costs and expanding partnerships. The collaborations include a rollout of Jenny Craig meal planning and weight loss consultations at 100 stores starting in January.
The clinics offer basic health care services for vaccinations, health tests and minor injuries. Walgreens plans to keep about 220 in-store clinics operated by outside health organizations.
“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,” Walgreens Boots Alliance co-chief operating officer Alex Gourlay said on a conference call with analysts.
Walgreens, which operates about 9,000 pharmacies around the U.S., is reshaping its offerings amid pressure on front-end retail sales of products like cosmetics, food items and household goods.
It has formed partnerships with grocery company Kroger Co. and delivery service FedEx, and announced the alliance with Jenny Craig last month.
“Jenny Craig has a long-standing history of changing lives through personal one-on-one support and lifestyle management. We found Jenny Craig to be a strong fit with our shared mission to provide trusted, proven and personalized care,” said Jim OConor, senior vice president of neighborhood health destinations at Walgreens. “Jenny Craig at Walgreens will give customers the opportunity to interact face-to-face with Jenny Craig consultants, just as our patients have experienced for over a century with our pharmacists.”
The 100 Jenny Craig at Walgreens will open in 20 states across the country in markets including Dallas, Houston, Philadelphia and Phoenix. After these locations open in January, the companies will begin to explore other potential in-store and digital initiatives.
“Jenny Craig and Walgreens are a natural fit, with both companies focused on making health services, including weight loss, easily accessible, effective, personal and valuable to customers,” said Monty Sharma, president and chief executive officer of Jenny Craig.
Additionally, 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.
Not all of the in-store health clinics will remain closed, however, as seven of the internally managed clinics in the Cincinnati area will reopen under new management by TriHealth, a local health system.
At the same time, the retailer has announced it is developing more than 30 “small store” pharmacies, most of which will be in urban areas. The smaller pharmacies will also feature front ends with a health and wellness focus.
According to Walgreens executives, the company will be opening these smaller stores in some of the country’s bigger cities as the chain looks at its future real estate needs and sheds costs and corporate jobs to be more competitive.
Walgreens didn’t indicate whether the new smaller-format stores would be the same in every market, but did say they would be more focused on pharmacy and over-the-counter health care products and pickup.
“We’ve got about … 30 or 40 now actively in the ground,” Gourlay told analysts about the new small store developments. “And we’re pleased with the results.”
As of now, 20 of the smaller stores Gourlay mentioned are open, with others currently under construction, according to Walgreens.
On the jobs front, the company recently announced the layoffs of an undisclosed number of employees at its corporate headquarters. During a conference call on the company’s fourth quarter earnings, Walgreens chief financial officer James Kehoe cited “select reductions” to explain the cuts, adding more restructuring is under way in various divisions to define the company’s new vision.
As the largest remaining stand-alone drug store chain in the U.S., Walgreens announced it has raised its 2022 annual savings target from its overall cost-cutting plans to $1.8 billion, up from $1.5 billion, as part of its fiscal fourth quarter earnings announcement.
For the fourth quarter, WBA reported earnings and sales that beat expectations. The company’s net income totaled $677 million, or 75 cents per share, down from $1.51 billion, or $1.55 per share, last year. Adjusted EPS was $1.43, ahead of the FactSet consensus for $1.41. WBA also reported sales of $34 billion were up from $33.4 billion last year and ahead of the FactSet guidance for $33.9 billion. Walgreens raised its annual cost savings target to more than $1.8 billion by fiscal 2022, versus a previous target of $1.5 billion.
Walgreens attributed the drop in earnings largely to charges related to its cost-cutting efforts. Walgreen’s estimates it will save $1.5 billion in annual cost savings by fiscal 2022.
WBA also reported sales of $34 billion, up from $33.4 billion last year and ahead of the FactSet guidance of $33.9 billion. Walgreens raised its annual cost savings target to more than $1.8 billion by fiscal 2022, versus a previous target of $1.5 billion.
“We are pleased to report fiscal 2019 results in line with our previously stated guidance despite a challenging operating environment,” executive vice chairman and chief executive officer Stefano Pessina said. “We are also making progress on our four strategic priorities, which we remain confident are positioning us to deliver long-term growth.”
“While we still face headwinds,” he added, “I am encouraged by the improvement in U.S. comparable sales performance in the second half of fiscal 2019 and our progress in managing costs in order to save to invest to grow.”
Sales in the Retail Pharmacy USA division increased 2.1% in the fourth quarter, reflecting 4.2% growth in pharmacy, noted WBA global chief financial officer James Kehoe. Full-year sales advanced 6.2%, reflecting acquired Rite Aid stores and organic sales growth of 3%.