Walgreens shares surge on plans to boost focus on health services

Walgreens Boots Alliance‘s new CEO Roz Brewer said Thursday that the drugstore chain will sharpen its focus on health care and turn it into the company’s “new growth engine.”

At a virtual investor day, she said the company’s nearly 9,000 stores across the U.S. will become places where customers can go to a doctor appointment, get medical tests and seek advice from a nurse or pharmacist. Those services will be under a new division of the company called Walgreens Health.

“This new Walgreens Health will make a difference and will began to transform us away from retail and just dispensing pharmaceuticals,” she said in an interview with CNBC’s Bertha Coombs. “It will be about the lives that we manage, and the lives that we touch and the lives that we can wrap physician and clinicians around in our buildings, both physically and digitally.”

Investors appeared receptive to Walgreens’ plan. Shares rose nearly 9% on Thursday after a virtual investor day. So far this year, shares are up nearly 19%.

The company’s plan calls for opening hundreds of primary care clinics, shaking up its selection of front-of-store merchandise and taking a stake in several health-care companies.

Walgreens expects that strategy to pay off in the coming years. Next year, adjusted earnings per share are expected to show flat growth on a constant currency basis, it said. But growth will accelerate so that adjusted earnings per share will rise about 4% annually over the next three years. Beyond fiscal 2024, the company’s growth algorithm will lead to adjusted earnings per share growth of between 11% and 13%.

Brewer pointed to the company’s fourth-quarter earnings as evidence that Walgreens is building on a firm foundation.

It recently decided to invest an additional $5.2 billion in VillageMD, a primary care company that will run clinics inside of Walgreens stores and is on track to go public in 2022. It also acquired a majority stake in home health-care company, CareCentrix, and specialty pharmacy company, Shields Health Solutions.

Along with ramping up on health-care services, Walgreens will step up its cost savings goal to $3.3 billion by 2024. It decided to raise that goal after shaving off $2 billion in costs, Chief Financial Officer James Kehoe said.

Brewer stepped into the top leadership role of Walgreens in mid-March after serving as chief operating officer of Starbucks and CEO of Walmart-owned Sam’s Club.

She said for her, the health-care mission is personal. At the company’s investor day, she recalled the final months of her mother’s life, when her family juggled medical bills, numerous doctors and kidney dialysis appointments. The experience, she said, was “incredibly confusing and unwieldly and burdensome.”

She said that distracted her family from what should have been the focus: enjoying the remaining time she had with her mom.

For so many Americans, she said that is the same experience — and one that Walgreens aims to solve by weaving together…