Pharmacy on sale

Pharmacy giant Walgreens Boots Alliance (Nasdaq: WBA) is on sale. Even after its better-than- expected fiscal fourth- quarter operating results, Walgreens stock was 32% below its 52-week high as of mid-november, and its dividend yield was recently over 4.3%.

The issue for Walgreens is that the pharmacy chain operating model is built on low margins and high volume. That volume dried up big-time when the pandemic hit, crushing front- end retail sales and hurting clinic revenue. On an adjusted basis, the coronavirus reduced earnings per share by $1.06 in fiscal 2020.

However, Walgreens Boots Alliance is undergoing a transformation that’s already beginning to pay off. The company is on track to recognize $2 billion in annual cost savings by fiscal 2022, while sparing no expense boosting its omnichannel presence. In the fiscal fourth quarter, online sales at Boots.com and Walgreens.com rose by 155% and 39%, respectively, from the prior-year period. The company has also increased the number of items that can be ordered online and picked up via drive-thru.

Perhaps the most exciting development is Walgreens’ partnership with Villagemd to develop up to 700 onsite, full-service health care clinics that’ll pair with Walgreens’ pharmacies for an integrated medical experience. The strategy is to reach out to patients with chronic conditions, making Walgreens a one-stop shop for their basic medical needs.

Long-term investors should give Walgreens Boots Alliance a closer look.