Is there a doctor in the deep-discounter's house?
A trip to Wal-Mart (NYSE:WMT) may mean a whole lot more, now that the world's leading retailer seeks to expand its program of leasing space to local clinics and regional hospitals.
Wal-Mart announced that it will add as many as 400 health clinics to its stores over the next three years, on top of the 76 locations currently open. If the clinics remain well-received, Wal-Mart may have as many as 2,000 units up and running in the next five to seven years.
Wal-Mart compares the announcement to its drugstore-crushing move to offer $4 generic prescriptions. That program has supposedly saved Wal-Mart customers $290 million on their drug refills. However, the health-clinic initiative isn't exactly like that. Wal-Mart will simply be collecting rent from a third-party provider. Clinic markups will have to be kept honest, but it's not as if having Wal-Mart as a landlord will necessarily make health care any cheaper.
Department stores recognize that they can capitalize on foot traffic to create incremental revenue from third-party service providers. Just as big-box retailers turned to companies like Rentrak (NASDAQ:RENT) to provide third-party video rentals, or contracted with a local bank or a fast-food chain to lease space in front of the store, this is just one more opportunity to explore.
Will others follow suit? Target (NYSE:TGT) had little choice but to follow Wal-Mart on $4 prescriptions, though the clinic initiative doesn't require a similarly immediate response. It's not as if someone will choose Wal-Mart over Target to do some back-to-school shopping just because Junior is also coming down with an ear and throat infection. Then again, maybe it will come to that.
Wal-Mart claims that more than half of the walk-up traffic at its clinics came from shoppers without health insurance. It's only natural for the company to spin this as a beneficial move for the country's uninsured population.
"Yes, this is about economics," CEO Lee Scott notes in this morning's announcement. "But above all, it is about our health."
Sorry, Mr. Scott. It is about economics above all, unless by "our health," you mean "Wal-Mart's financial health." The clinics are a great move, but don't go brushing up for a Pulitzer-winning speech.
For more on retailers setting up clinics, check out:
Wal-Mart has been singled out as an Inside Value stock pick. You can find out why with a free 30-day trial offer. Yes, that's four bucks cheaper than a generic prescription will run you at Sam Walton's place.
Longtime Fool contributor Rick Munarriz has probably spent more at Wal-Mart's online store than at its offline empire in recent years. He does not own shares in any of the companies in this story. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.
