Understanding Walgreens’s key initiatives
Walgreens Boots Alliance (WBA) follows a two-pronged approach. On the one hand, it works to increase its market share through targeted acquisitions and strategic partnerships. On the other hand, it tries to boost margins by improving its operating efficiency through its cost-saving initiates.
Let’s take a look now at Walgreens’s partnerships and initiatives launched in fiscal 2016. We’ll also look at the status of some of its previous initiatives.
Update on WBA’s cost-saving initiatives
Walgreens has initiated a cost-saving plan to achieve $1.5 billion in savings by the end of fiscal 2017. It plans to do this through measures such as restructuring its stores, eliminating inefficient promotions, and reorganizing divisional and field operations.
The company has made good progress toward achieving its goal and is on track to hit its target by the end of fiscal 2017.
Key partnerships during fiscal 2016
During fiscal 2016, Walgreens entered into various strategic partnerships to advance its retail and pharmacy operations. Some of these include WBA’s agreement with Express Scripts, its 90-day prescription agreements with OptumRx and EnvisionRx, and its partnership with Prime Therapeutics. The company expects these associations to increase volume and customers in its stores in the coming years.
WBA also strengthened its stake in AmerisourceBergen (ABC) to ~24.0% of ABC’s outstanding common stock during the year.
The company’s most-talked-about partnership in fiscal 2016 was its proposed acquisition of Rite Aid (RAD). The deal is currently awaiting FTC (Federal Trade Commission) approval. WBA sold 865 stores to Fred’s (FRED) on December 20, 2016, to obtain FTC approval. The FTC has asked WBA to close or sell around 650 of its stores, which is about 5.0% of the WBA-RAD combined store count.
Initiatives and partnerships across geographies in fiscal 2016
Let’s take a look now at WBA’s partnerships and initiatives across geographies. The company divested its Alliance Healthcare Russia operations, retaining a strategic stake in one of the leading health and beauty retailers in the country. The company also formed a franchise relationship with one of its leading retailers in South Korea.
The company has opened 100 new stores in Mexico, which is a key focus area for WBA’s expansion.
If you’re looking to add exposure to WBA, you can consider the SPDR S&P Retail ETF (XRT). XRT invests 1.4% of its portfolio in WBA.