'It makes sense' to have leadership with 'more extensive backgrounds' in health: Analyst on Walgreens exec shakeup
Walgreens (WBA) announced CEO Roz Brewer stepped down Thursday, in what was described as a mutual agreement in a company statement on Friday.
"The Board of Directors and Rosalind Brewer have mutually agreed that Ms. Brewer will step down as the Company’s Chief Executive Officer and as a member of the Board, as of August 31, 2023," according to the statement.
The company declined to provide more details about Brewer's abrupt departure, which comes just weeks after former chief financial officer James Kehoe's planned departure. There are now two top positions vacant at the retail pharmacy giant as it continues to shift to a focus on health services.
JPM analyst Lisa Gill wrote in a note Friday that the search for either the CEO or CFO should include a focus on healthcare — which Brewer, notably, did not have in her background.
"With WBA still in the midst of its healthcare-centric transformation, we view continued leadership uncertainty as adding to investor concerns. Given the company’s focus on healthcare going forward, we would expect that either the new CEO and CFO (or preferably both) would have healthcare backgrounds," Gill wrote.
Evercore ISI analysts said in a note that while the move may have taken some by surprise, it makes sense as the company's broader health portfolio grows.
"With the increased focus on growing the Walgreens Healthcare segment as a growth vertical to offset the core business’s profit challenges (hopefully starting in FY24), it makes sense to retrench and search for a new leadership team with more extensive backgrounds in healthcare services," the analysts said.
A career in retail
Prior to taking the helm at Walgreens in 2021, in the middle of the COVID pandemic, Brewer served as chief operating officer of Starbucks (SBUX) from 2017-2021 and president and CEO of Sam's Club (WMT) from 2012-2017.
She oversaw Walgreens' transformation from a retail pharmacy chain to now providing a range of healthcare services. The company acquired a majority stake in VillageMD in 2021, which subsequently inked a $9 billion deal for medical group Summit Health.
In addition, the company is building out a clinical trials service, aimed at increasing diversity in the space. It's an area Walgreens currently has a leg up, as competitor CVS (CVS) backed out earlier this year.
But like its competitors, Walgreens has had to contend with a decline in COVID-related demand, downgrading its outlook for the year. With waning demand for tests and vaccines, the company has returned to its pre-pandemic struggles of finding ways to increase prescription fill and get more customers in the door to buy front-of-store products.
Abrupt departure
The company declined to expand on the news, and the timing appeared to be a surprise.
Brewer had just wrapped up a leadership meeting Thursday, according to a post on LinkedIn, in which she gave no indication of the move. Brewer appeared to indicate staying with the company.
"I left the meeting energized and grateful for all our team members who each play such a critical role in delivering our vision to reimagine local healthcare. Our new fiscal year begins Friday, and I’m excited for what’s to come," she wrote.
On Friday morning, she wrote about the departure, saying it was one of the most difficult notes she has ever written.
"This decision did not come without great consideration for what is best for all of you, our shareholders, customers, patients, and my family. In the near-term, I will continue to advise the Board as they search for a permanent CEO with healthcare expertise," Brewer wrote.
The news pressured the company's stock Friday, with shares trading down nearly 7% in the session.
Follow Anjalee on Twitter @AnjKhem.
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Correction: A previous version of this article listed incorrect dates for Roz Brewer's employment with Sam's Club. We regret the error.
