Walgreens is making big changes post-Covid

Walgreens has some very 2023 problems right now.

First,the pandemic is effectively over in the eyes of much of the public, which means that parent company Walgreens Boots Alliance is losing out on a steady revenue stream from vaccinations and related sales—including an 80% drop in Covid-19 test kits.

Second, the pharmacy chain faces the same challenges as practically every other business—like shaky consumer demand and higher labor costs.

That adds up to a 3.3% quarterly drop in comparable US retail sales, a disappointing earnings report, and increasingly aggressive cost-cutting measures. Having recently hired a new CEO, the company expects to cut $1 billion in fiscal year 2024, including “going line by line” through its headquarters spend.

Unsurprisingly, the recent earnings call was heavy on the “right-sizing” references, including “closing unprofitable stores,” changing operating hours, and trimming capital spend by $600 million. The company is also closing or selling 60 of its US Healthcare clinics.

But Walgreens also is proposing some more proactive 2023 solutions for its 2023 problems, outlining strategies that seem inspired by some of the retail titans of the day.

The company has opened 11 “micro fulfillment” centers where it can centralize prescription fulfillment for some 4,300 stores in 29 states—although the expansion is on pause as they work out the kinks with the existing system. Walgreens is also driving its e-commerce effort to ship products directly from stores—most often in less than an hour, Ginger Graham, interim CEO, said. Amazon inspiration, anyone?

Walgreens also is weeding out low-performing products and shrinking its overall portfolio of SKUs—not unlike Costco’s retail palaces, which keep a relatively narrow catalog in stock.

And, of course, there are the unique opportunities that only a retailer with deep healthcare connections could pursue. Besides its broader push into healthcare services, the company also hyped up its new business as a clinical trials provider.

“Our goal is to be the independent partner of choice, not just in pharmacy, but also in healthcare services, where we can lower costs and help patients,” John Driscoll, president of Walgreens’ US Healthcare segment, said.

So, how’s that sound for a shot in the arm?