Partnerships Give Walgreens Much-Needed Growth Potential, but Investors Need to Be Patient
It's easy to understand why investors have been dumping their stakes in Walgreens Boots Alliance (NASDAQ: WBA) since 2015. Although revenue has continued to grow, income hasn't. The war on high prescription-drug prices has taken a toll, while the integration of nearly 2,000 Rite Aid stores doesn't appear to have been cheap or easy. This year's bottom line isn't expected to turn the corner, either.
For investors who can look a year or two down the road, though, Walgreens offers some overlooked potential. Although there's little it can do to alter the pharmaceutical industry landscape, there's much it can do to extract greater revenue from the front of its stores, which currently generates only around 30% of its sales. Partnerships are how it intends to do that.
A little over a year ago, Walgreens CEO Stefano Pessina commented that "partnerships bring us scale ... beyond anything we could do for ourselves." Since then, Pessina has acted accordingly by cross-selling goods with grocer Kroger, establishing at least 600 LabCorp testing centers in Walgreens stores, and planning to set up 100 Jenny Craig weight-loss shops within Walgreens' store network. The drugstore chain recognizes the most effective path to more foot traffic is through other players' brands.
Source Fool.com
