Walgreens Loses $6 Billion Due to VillageMD Clinic Investment

Walgreens Boots Alliance has announced a substantial loss of nearly $6 billion in its second quarter financial report, largely attributed to the declining value of its investment in doctor-staffed clinic operator VillageMD. This loss has prompted Walgreens to scale back on the expansion of doctor practices and clinics that were opened in partnership with VillageMD. The company's new chief executive, Tim Wentworth, has acknowledged the need to slow down clinic openings due to challenges in bringing in enough patients. Consequently, VillageMD has begun closing 160 clinics and exiting several locations as part of its restructuring. Despite this setback, Walgreens noted a 6.3% increase in sales for the quarter, propelled by growth in its retail pharmacy and U.S. healthcare businesses, contributing to the company's positive adjusted EBITDA and overall topline growth. Notably, Walgreens has narrowed its fiscal 2024 adjusted earnings per share guidance to $3.20 to $3.35 per share, reflecting its efforts to focus on customer engagement and value amidst the challenging retail environment. Although VillageMD continues to operate about 190 clinics, the company's impact on Walgreens' U.S. healthcare segment has significantly contributed to its sales growth. However, the company incurred a substantial operating loss of $13.1 billion in its healthcare segment, largely due to the non-cash impairment charge associated with the VillageMD investment. On the other hand, the U.S. retail pharmacy segment reported a 4.7% increase in sales to $28.9 billion, driven by higher branded drug inflation and robust performance in pharmacy services.