Walgreens could sell off its stake in primary care chain VillageMD — which it acquired in 2021 in a $5.2 billion deal — according to an Aug. 7 Securities and Exchange Commission filing.
Here are five things to know:
1. Walgreens is "currently evaluating a variety of options with respect to VillageMD in light of ongoing investments by the company in VillageMD’s businesses and VillageMD’s substantial ongoing and expected future cash requirement," the filing said, adding that the options could include sale of "all or part" of VillageMD, as well as possible restructuring options.
2. In the second fiscal quarter of 2024, Walgreens saw a $5.8 billion loss because of an investment devaluation in the primary care clinic chain. The company posted an operating loss of $13.2 billion compared to an operating income of $197 million in the same quarter last year, primarily due to a non-cash impairment charge of $12.4 billion related to VillageMD goodwill.
3. In June, Walgreens Boots Alliance said it plans to reduce its stake in VillageMD and shutter more underperforming stores in the next year. Walgreens Boots Alliance CEO Tim Wentworth said in a June 27 earnings call that the shift comes amid changing customer demographics and preferences, adding that 75% of the company's roughly 8,600 stores are responsible for nearly all of its retail profits.
4. Walgreens' VillageMD has also made plans to pull out of several markets in 2024 — it has exited Illinois, Indiana and Florida, and has plans to leave the Nevada market. It has six clinics in Illinois, which closed April 19; 40 clinics in Florida, which closed in March; 12 clinics in Indiana, which closed earlier this year; and six clinics in Nevada, which will close by the end of the year.
Additionally, VillageMD also sold 11 clinics in Rhode Island to Boston-based management company Arches Medical Partners in March.
5. In 2023, Walgreens said it would close 60 VillageMD sites in five markets to cut at least $1 billion in costs. Walgreens had previously announced it would close around 300 stores.
"As we prioritize creating value and enhancing our liquidity position, [Walgreens] has entered into an agreement with VillageMD that provides additional runway to continue active engagement with VillageMD’s stakeholders and other third parties to evaluate a variety of options that will position it for sustainable growth," a spokesperson for Walgreens said in an Aug. 8 statement shared with Becker's. "[Walgreens] is fully supportive of VillageMD as we work collaboratively with VillageMD leadership toward a solution with no changes to day-to-day operations for doctors or practice operations."