Walgreens shares surge on plans to boost focus on health services

Walgreens Boots Alliance’s new CEO Roz Brewer said Thursday that the drugstore chain will sharpen its focus on health care and turn it into the company’s “new growth engine.”

At a virtual investor day, she said the company’s nearly 9,000 stores across the U.S. will become places where customers can go to a doctor appointment, get medical tests and seek advice from a nurse or pharmacist. Those services will be under a new division of the company called Walgreens Health.

“This new Walgreens Health will make a difference and will began to transform us away from retail and just dispensing pharmaceuticals,” she said in an interview with CNBC’s Bertha Coombs. “It will be about the lives that we manage, and the lives that we touch and the lives that we can wrap physician and clinicians around in our buildings, both physically and digitally.”

Investors appeared receptive to Walgreens’ plan. Shares closed up 7.4% at $50.77 on Thursday. So far this year, shares are up more than 29%.

Brian Tanquilut, an equity research analyst for Jefferies, said Walgreens delivered on what many investors wanted Thursday by spelling out how it will become a proactive health-care player.

“Right now, people are saying, ‘It’s a sound strategy and we’ll give you a little bit of credit for that'” he said.

Walgreen’s plan calls for opening hundreds of primary care clinics, shaking up its selection of front-of-store merchandise and taking a stake in several health-care companies.

The company expects that strategy to pay off in the coming years. Next year, adjusted earnings per share are expected to show flat growth on a constant currency basis, it said. But growth will accelerate so that adjusted earnings per share will rise about 4% annually over the next three years. Beyond fiscal 2024, the company’s growth algorithm will lead to adjusted earnings per share growth of between 11% and 13%.

Brewer pointed to the company’s fourth-quarter earnings as evidence that Walgreens is building on a firm foundation.

Tanquilut said the new vision for Walgreens is a notable pivot.

“You are making the pharmacy a health center,” he said. “Instead of having a retail focus, the driver of value is no longer driving scripts [prescriptions] out of the pharmacy. It’s actually delivering care and making the patient loyal to the store.”

Ramping up health services

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