July was a busy month for Walgreens Boots Alliance. On Tuesday, July 7, 2020, the company announced a $1.0 billion investment into VillageMD, which by itself would have been big news. However, they also indicated that as part of the investment, Walgreens would be opening 500 to 700 physician-staffed clinics inside their locations across 30 markets over the next five years.

Two days later, Walgreens Boots Alliance announced their third quarter 2020 earnings, which included the headline-making news of substantial negative operating income caused by COVID-19. These twin announcements were noteworthy in that they extend beyond the ramifications for Walgreens and have broader implications across the retail and net lease marketplace. Here, we explore how the partnership with VillageMD coupled with the company's latest earnings report may impact commercial real estate investors.

Walgreens' Latest Financial Performance

Financial results announced by Walgreens a few weeks ago included a profound impact by COVID-19 resulting in $700 to $750 million of negative operating income. The impact to the business was not a matter of fewer shoppers coming into their stores or lower sales, which typically would be the cause. Rather, the majority of the financial hit was a byproduct of customers buying lower profit margin purchases as well as a slowdown in prescription sales growth.

Walgreens' financial data shows that COVID-19 has temporarily altered consumer behavior, but perhaps more interestingly, they've indicated the impact could be felt long-term. "We…believe that it is highly likely that certain aspects of customer behavior may change permanently," Walgreens stated on their most recent earnings conference call. Such a comment, while the marketplace is still gauging the fallout from the pandemic, is quite striking.