This company is going to collapse, and you need to prepare yourself for that. I left many years ago because I saw the writing on the wall. The recent sale to private equity will not save the company; it's the final death knell. Let me tell you a little story:
I worked for Walgreens in the Pharmacy from 2005 until 2013. I enjoyed the work so much that I started to pursue a PharmD. The work was always grueling, and we were always strapped for time, even in the beginning. I remember working double shifts during hurricanes and eating on the back counter often because we didn't have time to take breaks. I've heard the pharmacy actually shuts down now for lunch...must be nice.
At any rate, from the time I started until the time I left, our budget was continuously reduced. We were asked to do more with less, and it wasn't just us who suffered, it was the customer experience as well. These are operational changes meant to increase margins or protect existing margins, but they are not strategic choices. The reason they were necessary at all is due to strategic missteps, but what were they?
Here it is, from this single strategic error, all subsequent failures originate: Walgreens as a company failed to see the entire market shifting beneath its feet. Their strategy was based on the following model: expand stores, expand sales per store, reduce costs, and reward shareholders. The company was, and still is, optimized for operational efficiency. This model was fundamentally obsolete the moment that CVS and Caremark merged to create a fully integrated pharmacy services provider.
They failed to realize that the number of stores or operational excellence is meaningless in an environment where the PBMs are now the locus of control. The PBMs control the formularies, and hence, demand. They set reimbursement rates, and hence, margin. The number of stores isn't an advantage in this environment. If anything, it's a vulnerability.
The most egregious part of all this, is that it was entirely predictable. It didn't happen overnight. Instead of shifting their strategy and trying to acquire their own PBM, WAG sold theirs off. Then in 2011, they tried to play chicken with Express Scripts, and again they were critically mistaken. The number of stores is not equivalent to bargaining power. They lost that fight, and were forced into a worse agreement because of it. From then on, they lost negotiating power permanently, and all other negotiations would be from a weakened position.
Were that not enough, they bought Boots in 2014, which again doesn't solve the issue of vertical integration. They were still operating under the assumption that expanding the footprint would lead to better profits.
In an act of desperation, they invested in Theranos, and I think we all know how that went.
So where did that lead them?
To the following negative feedback loop:
lower reimbursement -> lower margin
lower margin -> labor and store cuts
labor and store cuts -> worse customer experience
worse customer experience -> lower foot traffic
lower foot traffic -> lower sales and even weaker negotiating position
This loop will not stop, and it will not be broken by Private Equity. Those are the only tools private equity really has. They can make operational changes. They cannot solve the strategic failure. They cannot suddenly negotiate better deals with the PBMs without leverage. They cannot reverse the regulatory framework that allowed this level of vertical integration to happen. They cannot afford to vertically integrate themselves, and there are no PBMs that would be a viable target even if they could.
So, where does all that leave us? There is only one inevitable conclusion: bankruptcy.
I saw this coming and left. I ask you, do you trust the leadership that allowed the company to reach this state from a position of strength, to be able to turn it around from a position of weakness? They made countless strategic errors. Do you trust your career with them?