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Walmart ( WMT ) to shut 51 healthcare centers, virtual care

offering

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Closures to occur within 30-90 days- spokesperson

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Co declines to disclose financial impact for group

By Siddharth Cavale and Granth Vanaik

April 30 (Reuters) - Walmart ( WMT ) said on Tuesday it

will close all 51 of its health clinics and shut its virtual

health care operations, saying it could not see it as a

sustainable business model to continue.

"Healthcare is expensive to run. We were finding that the

increased labor and operating costs environment, like with

reimbursement, both public and private, made it difficult (to

run the business) and obvious we had to close," Walmart ( WMT )

spokeswoman Marilee McInnis told Reuters.

The company said in a statement those challenges created an

environment where it saw a "lack of profitability" that made the

care business "unsustainable for us at this time."

Companies such as Walmart ( WMT ), Walgreens, Amazon ( AMZN ) and CVS have

expanded into providing healthcare services during the past five

years, seeing opportunities in the highly fragmented U.S.

system. But it has not been clear that consumers want such

services from retailers or that they are profitable.

Walgreens, for instance, is planning to close 160 of its

VillageMD primary care clinics after it recorded a $5.8 billion

impairment charge on its investment in VillageMD.

Amazon ( AMZN ) in February said it would cut a few hundred jobs

across its healthcare units, including clinic operator One

Medical which it acquired for $3.5 billion last year.

And Walmart's ( WMT ) sudden decision to close all its 51 health

clinics and telehealth operations marks a startling about-face

from its plan last year to nearly double the number of these

health centers across the U.S. by 2024.

Walmart's ( WMT ) Senior Vice President of Healthcare Delivery,

David Carmouche, highlighted the company's unique position to

provide affordable health care services in March last year.

Carmouche stated that the company's vision was to bring a

"one-stop model of healthcare" to communities, addressing the

cost and convenience barriers that many Americans face. He also

stated that it was in a unique position as 90% of the U.S.

population is located within 10 miles of a Walmart ( WMT ), a statistic

frequently cited by the company.

But on Tuesday, in a LinkedIn post, Carmouche wrote that

"though it didn't end where I had hoped it would...there will be

a time in the future to think about and discuss the challenges

specific to retail healthcare."

Success in the clinic space requires a solid economic model,

said Craig Garthwaite, professor and director of Healthcare at

the Kellogg School of Management.

"You can buy all the right ingredients - you still need a

good recipe to cook the meal," said Garthwaite. "This was sadly

quite predictable - if a missed opportunity."

Walmart ( WMT ) investor Charles Sizemore said he was disappointed

in Walmart's ( WMT ) move because he viewed health centers as a

differentiator and as a way to drive foot traffic.

"Unfortunately, the economics just don't work in this

environment," he added.

The Bentonville, Arkansas-based company started its health

clinics in Georgia in 2019, providing a range of services

including primary care, dental care, and telehealth.

By 2024 it had 51 clinics spread across five states

including Texas and Florida. The centers are usually situated

next to a Walmart Supercenter and house doctors and dentists.

Walmart ( WMT ) spokesperson McInnis said all the clinics will most

likely close within the next 45 to 90 days, with all employees

given the option to transfer to any Walmart ( WMT ) or Sam's Club store.

The company declined to disclose each health center's sales

figures or potential losses from their closures.

D.A. Davidson and Citi analysts said they expected the

impact of the closures to be immaterial.

Walmart ( WMT ) said it would instead focus on its 3,000 vision

centers and nearly 4,600 pharmacies located inside its stores

"whose importance has continued to grow," as it expands the

clinical capabilities of the services they provide.

Walmart's ( WMT ) pharmacies, for instance, offer many of the

clinical services its health clinics provided including testing

and treatment for respiratory illnesses like flu and strep.

Walmart ( WMT ) shares were down 1.3% in morning trading on Tuesday.