Walgreens Turns to Technology and Stops Non-Essential Projects
In June, Attorney General William Tong announced the final approval of $17.3 billion in opioid agreements with drug makers Teva and Allergan and pharmacies CVS and Walgreens.
Last week, Walgreens reported Q4 2023 earnings that missed Street estimates. For the full year, Walgreens had sales of $139.1 billion, up 4.8% from the year-ago period. It has a net loss in fiscal 2023 of $3.1 billion, compared with net earnings of $4.3 billion in fiscal 2022, partially driven by a $5.5 billion after-tax charge for opioid-related claims and lawsuits.
Ginger Graham, interim CEO, Walgreens, said on the retailer’s earnings call that the company expects over $1 billion of cost savings during fiscal year 2024 based on actions already taken and in progress. Some of the actions Graham cited included reducing headquarter costs going “line by line, expense category by expense category,” and reducing all nonessential spend.
“We've reviewed and are reducing areas for contracted or project work. We are altering our store operating hours based on local market trends,” Graham said. “We are closing unprofitable stores. We're driving supply chain efficiencies, including using artificial intelligence (AI) to more accurately forecast demand and optimizing our transportation network. We're also implementing centralized services that control inventory, reduce workload, and provide better customer support. We're taking a hard look at all projects and stopping those that are not essential.”
Walgreens has also introduced a perpetual pharmacy inventory system across the chain, available to all 9,000 stores as of last week. The technology provides complete visibility of inventory in the pharmacies and supports Walgreens work to reduce excess inventory and free up working capital.
Graham noted it has many benefits for the pharmacy staff, and feedback has been “overwhelmingly positive as it simplifies workflows reducing store level activities.”
Walgreens is also reducing implementing regional micro fulfillment centers to improve product availability, while, at the same time, reduce total inventory levels. The retailer’s 11th micro fulfillment center opened three weeks ago and these MFCs support more than 4,300 stores, filling over 2.3 million prescriptions each week across 29 states.
“As we fill more prescriptions centrally, it frees up our staff to spend more time with customers, offering other health-related products and services and it relieves some of the pressure on store staffing,” said Graham.