Walgreens Boots Alliance (WBA) is a new company betting on the old adage that bigger is better. And it’s well-positioned to benefit from changing demographics worldwide and shifting consumer expectations.
WBA is the company that emerged from the marriage of Walgreens and Alliance Boots, a Swiss company that operated drug stores throughout Europe. Walgreens owned about 45% of Boots before the buyout last year.
Buoyed by a strong quarter after the buyout, WBA, which had considered moving the company headquarters to Switzerland for tax reasons, looks to be a stock you want in your portfolio for a few reasons.
Growth spurt after buyout: One of WBA’s primary reasons for its initial stake in and eventual buyout of Boots was to expand the company’s footprint overseas. The new company is the largest drugstore chain in the U.S. and Europe, with more than 13,000 stores in 11 countries.
Net sales in the second quarter of fiscal 2015 increased 35.5% from the previous year, to $26.6 billion. This is largely attributable to the inclusion of Boots, according to WBA’s fiscal report. Analysts predict WBA stock will grow 14% a year over the next five years.
The aging population: Another reason to hold WBA stock is the fact that the world’s population is getting older. And it’s happening rapidly, according to the World Health Organization. Between 2000 and 2050, the percentage of people older than 60 is expected to increase from 11% to 22%.
An aging population should be a boon to WBA stock simply because it means more people going into the store to get prescriptions filled, take care of minor health-related concerns and even pick up a few items for the house.
Obamacare: The Affordable Care Act, referred to by many as Obamacare, should also be a benefit to WBA stock. The bill was signed into law back in 2010, but many of the major provisions didn’t go into effect until 2014.
Under the ACA, millions of individuals who had no access to health insurance now have coverage through Medicaid expansion, a key reform of the law. More healthcare coverage will mean more health-related customers for WBA.
Changing needs for the neighborhood drug store: Years ago, the neighborhood drug store was the place people went to pick up a few odds and ends for the house or get a prescription filled. Today, drugstore customers are just as likely to get their blood pressure checked or routine testing done.
It’s all part of the new mission of drugstore chains. They’re no longer just places to go to pick up a few household items but places people go to for their healthcare needs. WBA is one of the companies leading the way with its in-store healthcare clinics.
Bottom Line
WBA is evolving into something much more than just a chain of generic drug stores. As the world ages and healthcare needs grow, WBA stores are becoming one-stop shopping hubs for consumers’ health-related needs.
Walgreens’ buyout of Alliance Boots is also a good indicator of things to come for the new company. When it all boils down, more stores in more places should mean more customers and greater profits in the days ahead for WBA.
As of this writing, Will Emerson did not hold a position in any of the aforementioned securities.
