H.I.G. Capital has acquired Health-E Commerce, operator of sites FSAstore.com and HSAstore.com, as well as the Caring Mill private label brand of health care products.

Founded in 2010, Health-E Commerce offers over 2,500 FSA and HSA-eligible products and services on its ecommerce sites. Those offerings cater to consumers who can make purchases using flexible spending accounts.

The online retailer carved out a successful niche in health care ecommerce by simplifying the purchasing experience for consumers with FSA and HSA benefits, guaranteeing eligibility across a variety of categories. Those include:

• Over-the-counter medications
• Pain relief
• Skin and personal care
• Sun protection
• Diagnostic products
• First aid
• Telehealth

The company did not publicly release the terms of the deal.

“We are excited to enter this new chapter with H.I.G. as we continue to enhance Health-E Commerce’s breadth of product and telehealth service offerings to better serve our customers,” says CEO Preston Farrington. “H.I.G.’s consumer and healthcare experience, combined with its significant resources, position us to continue executing upon our growth strategy and vision for the company.”

Based in Miami, H.I.G. Capital is an investment firm with $64 billion of capital under management.

Prior to the sale to HIG Management, Health-E Commerce was managed by BPOC, a Chicago-based private equity firm that invests exclusively in health care companies.

William Blair functioned as financial advisor to Health-E Commerce, a portfolio company of BPOC, in connection with its sale to H.I.G. Capital. The transaction was signed on May 4, 2024, and closed on June 17.

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Parentheses indicate the merchant’s ranking in the Top 1000.

Amazon.com Inc. (No. 1)

Amazon beat expectations with earnings for its fiscal fourth quarter ended Dec. 31, 2023. Its net sales in the quarter grew 14% year over year to $170.0 billion.

Full-year sales grew 12% to $574.8 billion in 2023, up from $514.0 billion in 2022. Read more about Amazon’s earnings here.

Chewy Inc. (No. 12)

Chewy, Inc. reported that net sales grew in its Q4 and fiscal 2023 ended Jan. 28, 2024, even as pet adoptions declined.

Read more on Chewy earnings here.

Costco Wholesale Corp. (No. 6)

Costco said net sales grew 5.7% to $57.33 billion in its second fiscal quarter of 2024 ended Feb. 18. Ecommerce comparable sales grew 18.4% in the same period.

Read more on Costco ecommerce sales here.

GameStop Corp. (No. 35)

GameStop reported that net sales declined to $1.80 billion in its fiscal fourth quarter ended Feb. 3. That was a decline from $2.23 billion in the year-ago period. However, net income increased to $63.1 million from $48.2 million in 2022. Net sales for the full year fell 11% to $5.27 billion. The retailer said it would cut an undisclosed number of jobs to reduce costs as the gaming industry shifts to digital media from physical media.

H&M (No. 13 in the Europe database)

H&M reported that net sales declined 2% to 52.7 billion Swedish kronor in the first quarter ended Feb. 29. Meanwhile, operating profit rose to 2.08 billion kronor, surpassing analyst expectations. Increasing sales will be the top priority going forward, CEO Daniel Ervér told investors. The Sweden-based retailer said about 30% of sales in the quarter were online.

Home Depot (No. 4)

Home Depot reported that online sales increased about 2% year over year in its fiscal fourth quarter ended Jan. 28. Meanwhile, total Q4 sales decreased 2.9% year over year to $34.8 billion.

Read more about Home Depot’s earnings here.

Target Corp. (No. 5)

Target revenue grew 1.7% to $31.92 billion in its fiscal fourth quarter ended Feb. 3. Online sales declined 0.7%.

Read more on Target’s earnings here.

Walgreens Boots Alliance, Inc. (No. 15)

Walgreens reported that sales increased 6.3% to $37.1 billion in its second quarter of fiscal 2024 ended Feb. 29. The retailer recorded a net loss of $5.9 billion, compared to net income of $703 million in the year-ago period. U.S. pharmacy sales increased 8.2% due to “benefiting from higher branded drug inflation and strong execution in pharmacy services,” Walgreens said. Meanwhile, U.S. retail sales declined 4.5% because of “a challenging retail environment, channel shift, and a weaker respiratory season,” the retailer added.

Walmart (No. 2)

Walmart said U.S. online sales grew 17% for its fiscal 2024 fourth quarter ended Jan. 31. Its global ecommerce sales grew 23% over the same period, while international ecommerce increased 44%. 

Read more about Walmart’s earnings here.

So what does it mean?

• GameStop has had a tumultuous few years. The latest news of declining sales and layoffs show the market has little confidence in its ability to turn things around, as stock price declined 17% following the release.
• Walgreens grew its pharmacy business while retail sales declined, indicating consumers might be making fewer discretionary purchases during stops into the store.

Ecommerce earnings calendar

Here’s when other ecommerce earnings are scheduled to report this quarter:

• Amazon.com Inc.: Feb. 1
• Best Buy Co Inc.: Feb. 29
• Costco Wholesale Corp.: March 7
• The Home Depot Inc.: Feb. 20
• Lowe’s Cos Inc.: Feb. 27
• Target Corp.: March 5
• Walmart Inc.: Feb. 20

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The cities join Austin, Texas; Indianapolis, Miami, Phoenix and Seattle among locations where Amazon’s pharmacy service will fill prescriptions within a day. The ecommerce company touted e-bikes and electric vans among the delivery methods at its disposal. Drones will also make deliveries in College Station, Texas.

Amazon is No. 1 in the Top 1000, Digital Commerce 360’s ranking of the largest North American online retailers. Amazon is also No. 3 in Digital Commerce 360’s Global Online Marketplaces Database, which ranks the 100 largest such marketplaces by third-party gross merchandise volume (GMV).

How Amazon Pharmacy orders are fulfilled

“By bringing Amazon Pharmacy’s deliveries into our existing world-class logistics network, Amazon is building the fastest and most convenient service for the home delivery of prescription medications,” said Doug Herrington, CEO of Worldwide Amazon Stores, in a statement shared in a blog post by Amazon. “These faster delivery speeds will be a game changer when you or your family need your medications quickly.”

According to Amazon, e-bikes will be used for deliveries in dense urban settings such as Manhattan. Meanwhile, its fleet of electric Rivian vans and other vehicles will make deliveries in the greater Los Angeles area and similar suburban settings.

How Amazon Pharmacy uses artificial intelligence

Part of Amazon’s plan to speed up prescription processing for its same-day delivery markets involves the use of artificial intelligence (AI).

“AI doesn’t replace the role of the pharmacist; it allows them to operate at the top of their license,” said Kelvin Downes, director of fulfillment at Amazon Pharmacy. “Rather than doing duplicative work, pharmacists can use the skills they went to school for to deliver better patient experiences.”

One use case for AI will be interpreting handwritten prescriptions that come in. The tech will fact-check and verify that pharmacists receive correct information. Real-life pharmacists, however, will be tasked with ensuring that medicine, strength, dosage, quantity and address labels are all in order when deliveries leave their facilities.

Medications available through Amazon Pharmacy

Amazon Pharmacy’s latest announcement follows other recent news from March. The unit at Amazon previously announced that it would work with  Eli Lilly’s LillyDirect to deliver as many as 14 medications offered through the service. The weight-loss drug Zepbound was among the first to make it on to the list.

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Eli Lilly launched LillyDirect in January 2024 as a way to connect patients with telehealth providers, who can write prescriptions for medications that treat obesity, diabetes and migraines. Patients can also access the home delivery portion of LillyDirect without using its telehealth services.

The program initially launched with delivery from online pharmacy TruePill. Eli Lilly says medications may be delivered by either Amazon or TruePill, depending on the customer’s insurance coverage. Amazon says it will deliver the prescriptions in two days, which is the standard Prime delivery window.

Eli Lilly currently offers 14 medications through LillyDirect, and it says it will add more regularly. So far, the list includes the company’s recently approved weight-loss drug, Zepbound. It has seen “significant interest in the platform” so far, Eli Lilly said in a statement without revealing how many members have signed up.

Amazon ranks No. 1 in the Top 1000, Digital Commerce 360’s ranking of the largest North American online retailers. Amazon is also No. 3 in Digital Commerce 360’s Global Online Marketplaces Database, which ranks the 100 largest such marketplaces by 2023 third-party GMV. 

Eli Lilly and demand for weight-loss drugs

Eli Lilly is just one pharmaceutical company to sell a new class of weight-loss drugs in 2023. Novo Nordisk’s Wegovy and Ozempic also gained popularity. J.P. Morgan predicted that the market for these GLP-1 drugs, which are used to treat Type 2 diabetes and obesity, could exceed $100 billion in 2030. The firm also anticipates there will be 30 million U.S. users by that point.

Manufacturers have struggled to keep the medications in stock as demand skyrocketed.

Amazon’s history in health care

Amazon first launched its online pharmacy in 2020. That was two years after the retailer spent $753 million to acquire online pharmacy PillPack.

In 2023, Amazon delved further into health care by completing its $3.49 billion acquisition of primary care provider One Medical.

“As we continue to make it easier for people to get and stay healthy, we have identified areas where we can reposition resources so we can invest in invention and experiences that have a direct impact on our customers and members of all ages,” Neil Lindsay, head of Amazon Health Services, wrote in an internal memo at the time. “Unfortunately, these changes will result in the elimination of a few hundred roles across One Medical and Amazon Pharmacy.”

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Annual adjusted earnings will be $4 to $4.05 a share, the Deerfield, Illinois-based company said Tuesday in a statement, down from the earlier range of $4.45 to $4.65. Adjusted earnings for the third-quarter were $1 a share, short of analysts’ average estimate of $1.06.

Walgreens is facing a rapidly changing competitive environment. On Nov. 17, 2020, online retail giant Amazon.com Inc. said it would expand its push into US prescription drug sales.

Walgreens Boots is ranked #19 in Digital Commerce 360’s Top 1000, which ranks retailers by annual web sales.

“We have seen changing market trends that have consumers prioritizing value in response to a more uncertain and challenging economic environment,” Chief Executive Officer Roz Brewer said on an earnings call. “There has been a steep drop-off in Covid vaccines and testing, and with the end of the public-health emergency we are also experiencing a slower profit ramp for US health care.”

After the pandemic pulled people into drugstores for vaccines and tests, cracks are starting to reappear in the business model that depends on pharmacy-driven foot traffic to sell higher-margin items like toothpaste and over-the-counter therapies. The end of the pandemic emergency has also seen states drop residents from the rolls of Medicaid, the health program for low-income people.

Savings Target

And while Walgreens is betting on an expansion into the wider health world —adding primary-care centers to US locations, partnering with insurers and moving into clinical trial recruitment — the transition hasn’t been simple.

“The health-care services segment is taking longer to stand up,” Bloomberg Intelligence analyst Jonathan Palmer said in a note, “which isn’t a huge surprise and at the same time, Walgreens’ ability to catalyze the unit by deploying capital is slowly drying up.”

Quarterly revenue in the US health-care business matched analysts’ average estimate of $2 billion.

Walgreens raised the target for savings from a cost-cutting program to $4.1 billion from $3.5 billion, and expects savings of $800 million in fiscal 2024. The company said in May that it would cut 10% of its corporate workforce, or about 504 employees, as it seeks to restructure to align better with a focus on patient care. Those job cuts were completed in about four months, Chief Financial Officer James Kehoe said on the call, saving more than $100 million.

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Chewy ranks No. 13 in the Top 1000. The database is Digital Commerce 360’s ranking of the largest online retailers by web sales.

Customers requested health care from Chewy

Chewy primarily focuses on food and supplies in the $130 billion pet industry, but about one-third of that market is health spending, president of Chewy Health Mita Malhotra said. In 2022, Chewy had 20.4 million active customers, the retailer  said.

Before the pharmacy launch, Chewy heard feedback from customers that they wanted to buy medical supplies from the company. 

“We buy everything else from you … why don’t you carry medical? Why don’t you sell pharmaceuticals?” customers asked Chewy, per Malhotra. 

Chewy first ventured into health care as a pharmacy because it made sense with the existing ecommerce platform, Malhotra told Digital Commerce 360. The biggest opportunity was in medications for “chronic conditions and preventative care,” she said. They make up about 70% of medications Chewy sells.

Consumers showed a preference for buying those products, with examples like insulin and prescription food, as subscriptions. The strategy was a massive success, and autoship orders made up 73% of sales in the most recent fiscal quarter, accounting for $1.98 billion of revenue.

However, fewer than 5% of Chewy customers buy all their pet health care products from the ecommerce retailer, CNBC reported. The retailer hopes to make health care 30% of its business in the near future.

Building trust

Consumers’ willingness to pay for their pets’ health care has been profitable for Chewy, but it first had to convince them it was a trustworthy provider.

“Trust is rooted in how you really take care of customers. Are you listening to them? Are you taking care of them?” Malhotra said.

For Chewy, that’s an outgrowth of the retailer’s customer service, which has made headlines for how it treats pet owners in difficult times. Some customers told Entrepreneur in 2022 about receiving flowers, sympathy cards, and even portraits when their pets died.

Customer service representatives have leeway to have these interactions with customers, Malhotra said. Currently only about 20% of Chewy customers are buying pharmaceuticals, but she believes the number will grow thanks to the emphasis on customer service. Chewy declined to share specific statistics around its pharmaceutical sales. 

Pet health is resilient

The pet category is “resilient,” even in times of economic downturns, Malhotra said, and that’s even more true of pet health care. She cited a 2021 Metlife study of 2,000 dog and cat owners, which found that 58% said they worried more about their pets’ health than their own. 52% of respondents also said they spend more money on their pets’ health care each year than on their own. 

Malhotra said this trend is clear in Chewy’s sales.

“Food, pharmacy, wellness regiments: People are not pulling back on spending,” she said. Those categories are “durable,” while consumers might pull back on more discretionary items like toys if they have less to spend.

Better medical care and nutrition are also helping pets live longer. This leads to further spending on pet health care, and increasingly expensive care as they age, according to a report from Bloomberg Intelligence.

“We’re seeing a profound increase in consumer spending on pets and expect to see this continue through 2030,” co-author of the Bloomberg report Diana Rosero-Pena said. “Consumers are willing to pay more for items for their pets, with the pet food market having the potential to grow more than 50% from current levels by the end of the decade.”

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Called RxPass, the service lets patients order generic medications that treat more than 80 common health conditions, the company said in a Jan. 24 statement. Customers need to be members of Amazon’s $139-a-year Prime service to join and will be entitled to free delivery.

The Amazon drug subscription service is available in most U.S. states. For now, RxPass excludes a number of heavily populated ones, including California, Pennsylvania and Texas. The program’s web page lists a menu of 53 available medications.

“We are excited to offer our customers surprisingly simple, low pricing on the eligible medications they need each month,” said John Love, vice president of Amazon Pharmacy.

Timing of Amazon drug subscription service RxPass

Amazon for years has been trying to break into the health care industry. It purchased mail-order pharmacy PillPack Inc. in 2018 and joined a health care venture with JPMorgan Chase & Co. and Berkshire Hathaway Inc. that fizzled out after three years.

The company also developed a telehealth and home health service, called Amazon Care, that wound down after operating for a little more than a year. Amazon is now trying to purchase the parent of the One Medical line of medical clinics for $3.49 billion.

Amazon is No. 1 in the 2022 Digital Commerce 360 Top 1000 database. The Top 1000 ranks North American web merchants by sales. It is No. 3 in the Digital Commerce 360 Online Marketplaces database, which ranks the 100 largest global marketplaces.

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The vision care merchant reported revenue for the quarter rose 13.7%, to $149.6 million, from $131.6 million in Q2 2021. For the six months ended June 30, revenue was $302.8 million, up 11.9% from $207.5 million for the comparable period in 2021.

The net loss for the quarter ended June 30 was $32.2 million. That was up more than three-fold from $10.3 million a year earlier. For the six months, Warby Parker’s net loss was $66.3 million. The loss was more than triple the loss of $20.4 million during the first half of 2021.

While the quarter started strong, Warby Parker saw a shift in its productivity and overall demand starting in late May, Dave Gilboa, co-founder and co-CEO, told analysts during an Aug. 11 conference call.

“We believe this weakness in demand is industry-wide driven by lingering pandemic effects, inflation and shift in how consumers are spending their money,” Gilboa said, according to a Seeking Alpha transcript.

Despite the macroeconomic trends, the average revenue per customer grew 8.2% and reached a new high of $234 in Q2. The retailer also reported an 8.7% year-over-year increase in active customers to 2.26 million.

During the quarter, Warby Parker also streamlined its corporate team. It eliminated 63 roles, roughly 15% of its corporate headcount.

Lower margins, higher costs

The retailer attributed the second-quarter results to greater penetration of contact lens sales — which have lower profit margins than eyeglasses — and rising costs. The retailer says the increased contact lens sales contributed to a decline in its gross margin to 57.7%, down from 59.3% in Q2 2021.

Other factors affecting second-quarter results included store-count growth and increased salary and benefit costs associated with optometrists as the retailer hired them to boost its eye-exam business. Warby Parker says selling higher-margin progressive lenses and savings gleaned from using its in-house optical laboratory network partially offset those costs.

Warby Parker says its selling, general and administrative expenses increased from $31.6 million to $118.4 million. Reasons included an increase of $16.2 million in stock-based compensation costs and payroll taxes. Also contributing was a $3.3 million stock donation to the Warby Parker Impact Foundation.

Warby Parker offers revised guidance 

Warby Parker is revising its 2022 full-year outlook to the following:

• Net revenue of $584 million to $595 million, representing 8% to 10% growth versus the full year 2021. The retailer’s prior 2022 guidance projected revenue growth of 20% to 22% over 2021, or $650 million to $660 million.
• Adjusted earnings before interest, taxes, and depreciation (EBITDA) margin of approximately 3.8% to 4.4%. Adjusted EBITDA of about $22 million to $26 million, which includes an estimated impact of about $7.5 million related to the pandemic.
• 40 new store openings bringing the total store count to 201.

During the quarter ended June 30, Warby Parker reported:

• Revenue of $149.6 million, up 13.7%, compared to $131.6 million in the second quarter of 2021.
• A net loss of $32.2 million, up more than three-fold from $10.3 million a year earlier.
• An 8.7% year-over-year increase to 2.26 million active customers.
• An 8.2% increase in average revenue per customer increased to $254.
• The opening of nine new stores during the quarter, ending the quarter with 178 stores.

For the six months ended June 30, Warby Parker reported:

• Revenue of $302.8 million, up 11.9% from $207.5 million for the comparable period in 2021.
• A net loss of $66.3 million, more than triple the loss of $20.4 million during the first half of 2021.

Percentage changes may not align exactly with dollar figures due to rounding.

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Launched as an online-only retailer in 2010, Warby Parker (No. 315 in the 2021 Digital Commerce 360 Top 1000)  ended 2021 with 161 stores, including 35 that opened that year. It plans to grow to more than 200 in 2022.

Speaking at the Shoptalk conference in Las Vegas on Tuesday, Gilboa said the retailer has no plans to raise the price of its entry-level eyeglasses, which it has sold at the same price since launching in 2010. Even though U.S. inflation hit a 40-year high of 7.9% in February, Warby Parker’s control over its supply chain will allow it to hold the line on prices.

“We started Warby Parker because we were frustrated consumers — frustrated by the high price of glasses,” Gilboa said.

So, the brand wants to continue competing on price and has invested in vertical integration to help it maintain control of its costs and manufacturing process.

A recent example of its commitment to vertical integration was the brand’s opening of a 69,000-square-foot optical lab — its second — in Las Vegas. The retailer also operates a lab in Sloatsburg, New York.

Gilboa said other factors help Warby Parker keep selling $95 eyeglasses. They include long-term contracts with shipping carriers — which insulated it from rising fuel prices and fuel-related surcharges — and sales of higher-priced products such as progressive lenses.

Gilboa said the ability to make glasses with complicated prescriptions allows Warby Parker to serve all demographics. He said customers over 45 — those most likely to need reading glasses or progressive lenses — are the retailer’s fastest-growing demographic. In 2019, the brand also started selling contact lenses.

Values-based marketing

In addition to keeping prices low, Gilboa said he wants to keep connecting with consumers by living up to a set of values. The retailer, organized as a public benefit corporation, announced earlier this month that it distributed more than 10 million pairs of eyeglasses via its Buy a Pair, Give a Pair program.

Through its program, the retailer works with partners worldwide to ensure it distributes a pair of glasses to someone in need for every pair of Warby Parker glasses purchased.

“We think offering glasses for $95 makes them much more accessible. But there are billions of people around the globe who can’t afford $95 glasses,” Gilboa said. “And so, we try to — when possible — to go into those local communities and understand the best way to solve problems for them, whether that’s in rural Guatemala or in our backyard in New York.”

The retailer also operates the Warby Parker Impact Foundation, a public charity dedicated to helping people overcome the barriers to vision care.

As an example of how it tries to make its products more sustainable, Gilboa said, Warby Parker developed packaging for its private-label Scout contact lens brand that uses almost 80% less packaging than a traditional blister pack.

A public benefit corporation is formed to generate social and public good, and to operate responsibly and sustainably.

Opening more stores

Gilboa said the stores allow Warby Parker to offer services, including in-person eye exams. That’s important, he said, because U.S. consumers buy about 70% of their eyeglasses at the place where they get an exam from an optometrist.

While stores can generate new customers, they also introduce risks. Gilboa said sales at its stores took a hit during the pandemic, but he is optimistic about the long-term value of opening physical locations.

“We are expecting that at the end of this year, all of our stores across the country will be back at pre-pandemic levels,” Gilboa said.

In a March 17 conference call with analysts, Gilboa said the omicron variant of the virus that causes COVID-19 resulted in nearly $5 million of lost sales in Q4 and lost sales would total more than $15 million in Q1 — stemming from fewer people shopping Warby Parker stores.

Telemedicine investments

Even while opening stores, Warby Parker continues to invest in telemedicine, Gilboa said. Last year, it rolled out its Virtual Vision Test app that allows users to renew their eyeglasses or contacts prescription in 10 minutes.

A licensed doctor evaluates each exam and patients get results within 48 hours. The service costs $15, but the customer pays only if the current prescription is renewable.

Financial results

For the fiscal year ended Dec. 31, 2021, Warby Parker reported a net loss of $144.3 million, 158% more than the $55.9 million loss for the previous year. In Q4 alone, the loss was $44.9 million, a more than ten-fold increase from the compatible quarter a year earlier.

The primary reason for the increased loss was a sharp increase in selling, general and administrative expenses (SG&A), which increased $51.9 million compared with 2020, year, reaching $122.1 million.  Warby Parker reported that the primary causes of the SG&A increase were $31.6 million in stock-based compensation expense and related employer payroll taxes.

In 2022, Warby Parker expects net revenue of $650 million to $660 million, representing growth of 20% to 22% versus the full year of 2021. This outlook includes the impact of approximately $15 million in lost sales, or 3 percentage points of growth, related to the disruption omicron caused at the beginning of the year.

On the plus side, the eyeglasses brand reported that total 2021 revenue was $540.8 million, up 37.4% from $393.7 million a year earlier.

The retailer also reported the following for the year ended Dec. 31:

• Active customers increased 390,000, or 21.5%, to 2.2 million.
• Gross profit dollars increased 37.0% to $317.7 million.
• Q4’s average revenue per customer increased 13% year over year to $246.

Percentage changes may not align exactly with dollar figures due to rounding.

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