Walgreens Boots Alliance — owner of the eponymous drugstore chains in the U.S. and U.K. — reported a quarterly loss of $1.7 billion during its earnings call Friday. It also reported it’ll cut more than 4,000 jobs from its Boots stores and other businesses in Britain.
The bad news comes on the heels of Wednesday’s announcement that its Walgreens chain in the U.S. plans to partner with VillageMD to open doctors’ offices in more than 500 stores over the next few years.
Rival CVS has made similar moves since it acquired the insurer Aetna in 2018.
Most Americans live within 5 miles of a Walgreens or a CVS. The stores are hoping to use that to their advantage, said Jeffrey Galak, a marketing professor at Carnegie Mellon University.
“If these stores realize that putting a medical practice of some sort, instead of the typical merchandise they have, will increase their sales per square foot — that’s a win for them,” Galak said.
That’s because even though most of the profit at a Walgreens or CVS comes from prescription drugs — most of the sales are all the things you walk by to get to the pharmacy: mascara, candy bars, razor blades, shampoo. Those sales are down.
“Most of what you can get in a drugstore you can get in a grocery store or at Walmart or, increasingly, through the mail,” said Erik Gordon, a business professor at the University of Michigan.
So that’s why both chains have been trying to shift their focus to wellness. They’re selling fitness supplies. CVS stopped selling tobacco, and Walgreens stores have ramped up their makeup and skin care offerings. Neil Saunders is an analyst with GlobalData.
“They’ve also tried to introduce more wellness products into the store, focusing more on things like sleep wellness, vitamins, all of those kinds of products that help enhance our health,” Saunders said.
The VillageMD clinics will take up about a quarter of the space in an average Walgreens store. The chain hopes to open between 500 and 700 locations over the next five years. That’s compared to CVS’ plans to open 1,500 HealthHUB stores with expanded clinics, testing labs and wellness rooms for yoga and seminars.
“CVS and Walgreens are on a similar trajectory. Both want to become much more rounded players in the health space,” Saunders said.
Saunders thinks CVS has the advantage here. It was the first to move, and its $70 billion acquisition of Aetna health insurance gives it some clout.
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