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Walgreens Seeks Strategic Alternatives for Boots, Expands VillageMD as Healthcare Pivot Continues

Walgreens
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Walgreens will examine strategic alternatives for the UK-based Boots drugstore chain and expand its VillageMD operations, as the pharmacy retailer works toward “building our next growth engine,” CEO Roz Brewer said at the 40th Annual JPMorgan Virtual Healthcare Conference. Both efforts are part of Walgreens’ ongoing plan for “focusing our portfolio, optimizing our capital allocation and accelerating our transformation to healthcare.”

Walgreens’ strategic alternatives reportedly include a potential sale of Boots, according to Sky News. People familiar with the matter said that Bain Capital and CVC Capital Partners are assembling a joint bid for the drugstore chain “predicated upon substantial investment in its digital, beauty and healthcare services offerings.”

However, Brewer did not comment on whether or not the retailer would pursue a sale. “While the process is at an exploratory stage, we do expect to move quickly,” she said during the conference. “The review is focused on our successful Boots business, including the No7 Beauty Company, and is happening against a backdrop of very strong results. As we noted with our earnings last week, Boots is growing strongly and driving international [adjusted operating income] growth of over 88% in the first quarter.”

A potential sale of Boots could be lucrative for Walgreens. The chain has more than 2,200 locations and 51,000 employees, as well as private brands including No7 and Soap & Glory. A potential divestiture would likely focus on helping Walgreens pivot to a healthcare-focused model rather than stepping away from a struggling banner.

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This effort will be supported by a planned expansion of VillageMD into even more Walgreens pharmacies. The retailer already operates co-located clinics at 81 stores and now plans to reach at least 200 by the end of calendar 2022.

Additionally, the Health Corner concept, which is focused on neighborhood-centric, highly personalized care, will expand from 47 to 100 locations over the coming year. Both expansions will be supported by investments in Walgreens’ digital offerings as well.

“Consumer engagement occurs through a personalized and omnichannel experience,” said Brewer. “We are connecting our physical health corners with our digital app and our other unique complementary assets to meaningfully reduce costs and improve health outcomes and equity.”

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