Walgreens is painting a much broader picture of the scale of VillageMD's footprint reduction, six months after announcing clinic closures.
Walgreens-backed VillageMD has closed 140 clinics this year across several states and is planning to close another 20, Walgreens Boots Alliance CEO Tim Wentworth told analysts on Thursday's second-quarter earnings call.The closings represent roughly 50% of the original footprint.
Related: Walgreens' VillageMD continues clinic closing spree
It's a big pullback on an asset that Walgreens had up until recently pegged for rapid expansion, with plans to roll out hundreds of clinics attached to Walgreens stores over the next few years. Wentworth said VillageMD is instead focusing on density in markets where it sees the most opportunities.
In October, Walgreens announced VillageMD, which operates primary care clinics as Village Medical, would close 60 locations, some of which opened less than a year ago. The closures are part of a larger $1 billion cost-cutting initiative at Walgreens, which also involved cuts in its pharmacy division and in capital spending.
"We have hard work ahead of us in our journey to simplify and strengthen [Walgreens Boots Alliance], but we are encouraged by our progress. This team has a clear mandate to act with everything on the table to put our business on the right track," Wentworth said during Thursday's call.
Walgreens reported a $5.9 billion net loss, or $6.85 per diluted share, in its second quarter, compared with a $703 million net gain, or 81 cents per diluted share, in the year-ago period.
The company's healthcare services division, which includes VillageMD, achieved its first-ever quarter of positive adjusted earnings before interest, taxes, depreciation and amortization. However, the company's second-quarter earnings took a hit with a $5.8 billion impairment charge related to VillageMD goodwill, which acts as a noncash write-off on the balance sheet to show when an investment hasn't performed as expected.
VillageMD started downsizing in January, closing three clinics in New Hampshire, 10 sites in Jacksonville, Florida, and all 12 of its clinics in Indiana. It shuttered 12 Massachusetts clinics in February. Earlier this month, VillageMD closed all its Florida locations and sold 11 Rhode Island clinics to Boston-based Arches Medical Partners. Next month, it plans to close all its clinics in Illinois and Nevada.
As of May 1, the provider will operate Village Medical clinics in Arizona, Colorado, Georgia, Kentucky, Michigan, New Jersey and Texas, barring additional closures.
Walgreens Chief Financial Officer Manmohan Mahajan said Thursday executives are closely monitoring VillageMD's performance and are expecting challenges with clinic closures, slower-than-expected growth in patient panel growth and market pressures from payer reimbursement models.
Meanwhile, Walgreens continues the strategic review of all its businesses, which will take another three to six months, Wentworth said.
"We are taking a thoughtful approach fueled by a sense of urgency," he told analysts.
