Today, Walgreens Boots Alliance (WBA) made the announcement that they are parting ways with their CEO of two years, Roz Brewer. This decision has raised various questions and can be interpreted in different ways. Despite the overall market trading significantly higher, Walgreens’ stock has slightly declined in early trading, indicating a negative perception. However, a broader analysis is needed to understand the implications.
Evaluating the CEO Change
Some may argue that this move shows that CEOs are held accountable and justifies their high salaries. The chart above demonstrates that Walgreens’ stock has suffered losses, leading to a valid reason for replacing Brewer. On the other hand, when comparing the chart of Walgreens with its principal competitor, CVS, it appears that Brewer’s inability to uplift the stock reflects industry-wide challenges faced by retail pharmacies in a post-pandemic world, where the urgency for vaccinations has diminished.
Accountability and Diversity
For others, this change highlights the question of CEO accountability. Brewer, being a woman of color, adds weight to this argument. However, it is worth noting that CVS also has a female CEO, and Walgreens’ temporary replacement is also a woman. While the gender argument loses some strength, the issue of race still remains. Dismissing one of the few black female CEOs while many older white men maintain their positions creates unfortunate optics. However, focusing on the temporary replacement and WBA’s future goals, it is evident that factors beyond race influenced this decision.
Shifting Strategies and Future Ambitions
Both Walgreens and CVS aim to position themselves as healthcare companies rather than just retailers. Walgreens has recently acquired Summit Health, VillageMD, and Shields Health, emphasizing a strategy of vertical integration similar to CVS. CVS now possesses the ability to write prescriptions at their primary care locations, fill them at their pharmacies or specialty pharmacy, and even handle insurance claims through Aetna. Walgreens is likely seeking a similar path, which makes the experience and expertise of Brewer and her replacement, Ginger Graham, a crucial consideration.
Regulatory Challenges and Potential Stock Recovery
While the CVS business model proves successful, attracting the attention of regulators could be a concern. The Biden administration, through the FTC, has shown a proactive approach to healthcare regulation. If Democrats remain in power next year, there is a possibility of facing regulatory challenges towards vertical integration in the healthcare sector. Nonetheless, Walgreens’ decision to reshape their drugstores into integrated healthcare companies aligns with corporate perspectives. Graham’s pharmaceutical CEO experience makes her better-suited for this path compared to Brewer. Although the initial market reaction has been negative, a potential stock recovery in the near future seems likely.
The opinions expressed in this article are solely those of the author and do not necessarily reflect the views of Nasdaq, Inc.
