Walgreens Closing 160 VillageMD Outlets

Walgreens, which invested more than $6B during the pandemic for a majority stake in primary care chain VillageMD, has now written off most of that bet as it races to close VillageMD outlets across the country.

The retailer revealed a $6B net loss in its quarterly results, most of which was attributed to what Walgreens CFO Manmohan Mahajan called “a mismatch” in the value of VillageMD in Walgreens’ balance sheet and the actual market value of the primary care clinic subsidiary.

Mahajan told investors during an earnings call that his team had discovered the discrepancy and as a result Walgreens was forced to take a $5.8B goodwill impairment charge.

Walgreens signaled last fall that its strategic shift into health care services was in trouble when it said it would close 60 “underperforming” VillageMD clinic outlets as part of a $1B cost-cutting move.

In last month’s earnings call, the retailer dramatically expanded the scope of the problem: Walgreens disclosed that it is closing 160 VillageMD outlets, 140 of which are already shuttered.

VillageMD has closed stores in Florida, Indiana, Illinois, Massachusetts, Rhode Island and Nevada, according to a report in Healthcare Dive.

After initially investing $1B in VillageMD in 2020, Walgreens poured another $5.2B into the network of physician offices a year later.

The retailer created a US healthcare division including VillageMD, specialty pharmacy chain Shields Health Solutions and at-home care provider CareCentric.

VillageMD was still in expansion mode in the first quarter of 2023, when it acquired Starling Physicians, an operator of primary care and multi-specialty practices with 30 locations in Connecticut, for an undisclosed price. The Starling acquisition expanded VillageMD’s national clinical footprint to more than 700 locations.

At the end of 2022, VillageMD acquired medical practice Summit Health, parent of urgent care chain CityMD, in a $9B deal in which Evernorth, Cigna’s health services division, also took a stake.

In 2022, Walgreens projected that it would accelerate the opening of more than 600 Village MD outlets in its pharmacies, known as Village Medical at Walgreens, in more than 30 US markets by 2025.

At the time of the Summit acquisition, Walgreens was projecting profitability for its US Healthcare segment by 2024. After the Summit acquisition, Walgreens projected an accelerated profitability timetable for US Healthcare, moving it up to the end of 2023.

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