Sales in the healthcare segment grew 7% to $2.1 billion in the fourth quarter and increased 27% to $8.3 billion in fiscal 2024.
The healthcare segment's key asset, primary and multispecialty care provider VillageMD, is not a crucial part of Walgreens' future, but the company wants to avoid destroying the provider's value, CEO Tim Wentworth said on a Tuesday call with analysts.
In March, Walgreens reported a nearly $6 billion impairment charge in its fiscal second quarter on the VillageMD investment. The provider shuttered more than 150 primary care clinics, or about 50% of its footprint, from January through April — a sharp reversal from previous plans for rapid expansion. VillageMD still operates primary care clinics in seven states.
In June, Wentworth said Walgreens plans to reduce its 53% stake in VillageMD, but has not disclosed any investor agreements. The retail pharmacy chain became majority owner in VillageMD in late 2021 with a $5.2 billion investment.
"It has been a longer process. I wish I could've wiggled my nose and just made it happen," Wentworth told analysts Tuesday, referring to monetizing the VillageMD investment. "It is very complicated, and therefore, we're going to get it right."
Walgreens spent the last six months exiting programs in its healthcare segment that the company didn't think would generate growth. The segment is now focused on growing assets such as specialty pharmacy and data analytics, as well as reorienting around the core pharmacy business, Mary Langowski, president of Walgreens' U.S. healthcare business, said during the call.
Wentworth named Langowski president of the U.S. healthcare business in February, replacing John Driscoll.
Walgreens is battling a challenging operating environment in its core pharmacy business, in addition to waning profits on the retail side. Executives said Tuesday the company plans to shutter about 1,200 stores over the next three years, including 500 closures slated for 2025. Most are set for the back half of the year.
The company is focused on stabilizing pharmacy operations, improving its retail strategy and reducing net debt, Wentworth told analysts.
Walgreens exceeded its recent cost-cutting goal of $1 billion, with most savings coming from retail pharmacy, Chief Financial Officer Manmohan Mahajan said.
