Walgreens' Exit From Health Clinic Business Is a Warning to Rivals
The idea seemed reasonable enough. Consumers already visit Walgreens drugstores seeking health-related solutions. Adding health clinics to its stores' footprints is an intuitive way to drive more revenue by drawing more people to its locations.
Walgreens Boots Alliance (NASDAQ: WBA), however, appears to have learned that starting a health clinic business from scratch is no guarantee of profits. On Monday, the company announced it would be shuttering about 150 of its wholly owned health clinics. The company's in-store clinics operated by third parties will continue to operate, and any new ones established in the future will also be owned and operated separately from Walgreens. COO Alex Gourlay explained that its home-grown clinic network was still losing money after several years of operation and that these closures would play a part in its plan to save a targeted $1.8 billion in costs per year.
That's not to suggest there's no money to be made in the business. CVS Health (NYSE: CVS) is forging ahead with its plans to cultivate clinics and other related in-store health services. But by and large, the decision may serve as a warning to the likes of Walmart (NYSE: WMT) and Rite Aid (NYSE: RAD), the former of which recently opened a 10,000-square-foot healthcare facility in Georgia. That warning is, tread lightly and proceed cautiously. This game isn't easy.
Source Fool.com
