Market Commentary

Retail Health Clinics Retreat: Walmart, Walgreens & CVS

Turra Rasheed
29 May 2024 · 2 minutes read

In a significant retreat from the retail health clinic model, Walmart Inc (WMT:US), Walgreens Boots Alliance Inc (WBA:US), and CVS Health Corp (CVS:US) are scaling back their once-promising ventures. 

Despite initial optimism, financial realities have proven challenging. Walgreens' VillageMD posted a staggering $6 billion loss, signaling the difficulty of profiting from this healthcare approach. Consequently, Walgreens is shuttering 160 locations. Notably, Senator Tuberville, Rep. Ro Khanna, and Michael Burgess were seen divesting their Walgreens stock amidst this downturn as the stock kept a bearish trend in recent months.

Similarly, CVS, the largest operator with a 63% market share, is closing several MinuteClinics across Southern California and New England. Representative Bill Keating recently sold his CVS shares, reflecting bearish sentiment around the company's prospects.

Even though sentiment and stock for Walmart have not been significantly affected, supported with bullish purchases by Rep. Ro Khanna and Rep. Kathy Manning, the retail giant announced the closure of its 51 in-store healthcare centers. Despite their aggressive plan to establish 4,000 clinics by 2029, escalating costs and low insurance reimbursements have led to a strategic downturn.

The collective retreat underscores the complexities of integrating healthcare into retail spaces. Retail health clinics are facing several key challenges: high operational costs, with staffing proving more expensive than anticipated; low insurance reimbursements, which often fall short of covering operational expenses; and a volume-dependent revenue model that requires high patient flow to be profitable, a target many clinics struggled to meet. 

Additionally, the anticipated cross-selling benefits, where clinic visits would drive sales of other retail products, largely needed to materialize. As these retail giants recalibrate, the experiment of retail health clinics stands as a cautionary tale in the evolving landscape of primary care delivery.