The leading drug store chain in the US, Walgreen (WAG) has recently undertaken an innovative new initiative whereby the company will provide tele-healthcare services to customers for conditions that do not need any physical examination. The company is aiming to do this via the introduction of a new mobile app. Walgreen is providing these services in collaboration with on demand tele-health service provider MDLive Care. Over the years, Walgreen has emerged as the single largest drug store chain in the US and has a good reputation with customers and investors alike. Walgreen's share prices have been steadily rising over the course of the past decade and reached their highest level of $76.08 in July. Prices went down steeply after that but in recent months prices have shown a sharp increasing trend as investors gained confidence from an impressive third quarter performance. Walgreen's shares are on the rise and nearing the decade high mark. The drug store chain's shares were last trading $74.50 at the close of trade on December 12th.
Summary of Walgreen's Q4 and FY 2014 Financial Performance
For the final quarter of the fiscal year 2014, Walgreen reported a fairly impressive financial performance, top line growth was solid but bottom lines worsened owing to the increased pressure on margins, especially gross margins. Walgreen reported fourth quarter revenues of $19 billion, up almost 6% from $18 billion in the year ago quarter. Full year revenues for Walgreen grew to $76.4 billion, also increasing by 6% from $72.2 billion in the previous year. Operating incomes for the fourth quarter fell 5.8% year on year to $969 million. Operating incomes for the full year 2014 amounted to $4.2 billion, growing 6.4% from the previous year. During the fourth quarter, Walgreen reported losses of $239 million as gross margins continued to worsen. For the full year, the retailer reported net income of around $2 billion. Net income for the year 2014 fell almost 21% from that of 2014.
24 Hour Medical Services from Walgreen
Walgreen has branched out its services toward the provision of e-health services. Through its new mobile app which has been developed in collaboration with MDLive Care, Walgreen's customers will be able to make virtual visits to the doctor. The app will allow 24-hour access to a certified physician who can be at the customers' beck and call. Walgreen's app has currently only been launched in the states of Michigan and California. The retailer is testing the waters before launching the app and the virtual healthcare services nationwide. The innovation shows why Walgreen has been able to establish itself as the leading drug retailer in the US and will allow the company to further strengthen its hold over the market. The $49 virtual doctor visits will be available to both IOS as well as Android users as Walgreen aims for complete market coverage for the regions in which the app has been launched.
Trends that will benefit Walgreen's tele-healthcare venture
It is important to note that demographic trends in the US are pointing towards an aging population with low birth rates and higher life expectancies. With an aging population, there will be a much lesser inclination towards making visits to the doctor for ordinary medical problems which is where Walgreen's services will come in and allow aged patients to conveniently consult with a doctor whenever needed. Moreover, with national healthcare plans such as the Affordable Care Act in place and gaining popularity, there is an increased trend towards medical services provided at home as consumers seek to avoid expensive hospitals and clinics. Walgreen's extended healthcare technology will cater towards the increasing demand for stay-at-home healthcare services. The expansion of Walgreen's healthcare offerings will allow it to compensate for revenues previously not realized due to health insurance.
In conclusion, it can be said with great confidence that Walgreen has surely proven why it is the leading drug retailer in the US, despite struggling with margins and failing to generate profits during the final quarter of its fiscal year, the company has managed to restore investor confidence as a result of positive synergies created by its deal with Alliance Boots as well as its recent expansion into mobile technology based healthcare offerings. The company commands a great degree of confidence from investors as they have faith in its business experience and solid standing in the market. The company has also rewarded investors for their faith by continuing its strong payout tradition and increasing dividends over the course of the year. At present, Walgreen represents a highly worthy prospect for long term as well as short term investors and with prices on the rise, now would definitely be an ideal time to buy into the company's stock.
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