Will Zebra Technologies Help Walgreens Bounce Back?

In a strategic move to enhance operational efficiency and customer experience, Walgreens Boots Alliance has successfully integrated Zebra Technologies’ Workcloud Actionable Intelligence software. This optimization effort has resulted in significant cost savings, helping the company better manage operations and combat retail shrinkage.

The integration of Zebra’s Workcloud suite includes Actionable Intelligence, Task Management, and Demand Intelligence software. These tools are designed to streamline task management, improve inventory accuracy, and reduce total retail loss. By using Zebra’s modular software in conjunction with its hardware solutions, Walgreens has effectively increased operational visibility and compliance.

Suresh Menon, Senior Vice President and General Manager of Software Solutions at Zebra Technologies, emphasized the company’s commitment to helping retailers like Walgreens modernize their operations. Zebra’s technologies enable increased accountability, visibility, and actionable intelligence, driving better business outcomes and substantial savings.

The financial benefits of implementing Zebra’s Workcloud Actionable Intelligence are substantial. Walgreens has saved millions of dollars over five years, thanks to improved operational compliance and the ability to swiftly identify and address areas of loss. The comprehensive deployment of Zebra’s software and hardware solutions has benefited 20,000 associates across various roles, including asset protection, store operations, pharmacy management, and inventory specialists.

Tim Bailey, Senior Manager of Asset Protection Solutions at Walgreens Boots Alliance, highlighted the positive impact of these advancements. The deployment of Zebra’s solutions has empowered Walgreens’ workforce, improving associate engagement and elevating the overall customer experience. This technology-driven approach has also enabled Walgreens to address phantom inventory, shelf gaps, fraud detection, and markdown non-compliance, reducing waste by an impressive 27%.

However, Walgreens plans to close numerous underperforming stores across the U.S. as part of a multi-year effort to enhance efficiency and financial health. This announcement, which included a reduced profit forecast for 2024, caused a significant drop in shares. Over the past year, Walgreens’ stock has fallen by over 45%. Despite setbacks, CEO Tim Wentworth highlighted strong performance in Walgreens’ international and U.S. healthcare segments. Walgreens now expects adjusted earnings for fiscal 2024 to be between $2.80 and $2.95 per share, down from the previous estimate of $3.20 to $3.35 per share.

Furthermore, Walgreens and other retail pharmacy chains have been grappling with escalating shoplifting incidents since the pandemic, prompting measures such as locking up items and closing high-theft locations. However, Walgreens’ challenges run deeper, involving stiff competition and unsuccessful growth strategies. In fact, Walgreens acknowledged last year that it might have overstated the impact of shoplifting on its business.

A significant factor behind Walgreens’ closures is the declining profitability of the current pharmacy model. Analysts point to falling reimbursement rates for prescription drugs as a major issue. Drugstores rely heavily on prescription sales for the bulk of their revenue, but profits from this segment have dwindled due to lower reimbursement rates and rising fees.

Pharmacy benefit managers (PBMs), who negotiate drug prices and rebates with manufacturers on behalf of insurers, largely determine the prices customers pay and the payments pharmacies receive. In their quest to boost profits, PBMs have been reducing reimbursement rates, putting financial pressure on pharmacies. The pharmacy industry argues that PBMs wield excessive control and can significantly squeeze their margins, whereas PBMs contend that their negotiations help keep drug prices down.