A summary of noteworthy happenings at large corporations this week, include:
Amazon’s decision to cut prices on “hundreds of items” at its Whole Foods stores, as Amazon seeks to change the high-cost image of the food company. The cuts effect “more than 500 products and include a focus on produce and meat,” (ref. WSJ). The cost-cutting move follows Amazon’s increase of prices on some Whole Foods’ consumer products in February, reflecting the increased costs passed on to them by suppliers who contend that the additional costs reflect higher transportation and ingredient costs. The latest cuts, which will mean prices reduced on-average by 20% on select items, are the broadest reductions since Amazon bought Whole Foods in 2017. The move is an effort by Amazon to keep up with large food sellers such as Walmart, Kroeger who have thus far managed to hold down prices to defend their share of the food retail market.
Walgreens reports that it now expects its adjusted earnings to be flat from a year earlier down from earlier forecasts of 7-12% growth. CEO Stefano Pessina labeled the past quarter as “the most difficult that the company has faced in recent years.” Several factors feed in to this difficulty – for one, there has been consolidation among insurers and pharmacy benefit managers which means that Walgreens is faced with tougher negotiations for drug reimbursement rates, while at the same time prices of generic drugs that Walgreens purchases are falling at a slower rate. One other stand-out factor is that there was a weak flu and cold season this year, which meant retail sales for remedies fell 3.8% from a year ago. But, as analysts point out, identifying what went wrong is easier than fixing it. Walgreen’s balance sheet is in decent shape and it has increased its target for annual cost savings to more than $1.5 billion by fiscal 2022. But the challenges for the company are that a primary competitor, CVS, now owns a major health insurer and will likely be better positioned to handle reimbursement pressures. And, Amazon has purchased online pill pharmacy, PillPack, and can be expected to expand its pharmacy in upcoming years. Time will tell how Walgreens is able to weather this storm. Looking at new organizational approaches and entrepreneurial activities is certainly one that comes to mind.
Facebook – in a year filled with scandal about the handling of users’ personal data and passwords – has been ostensibly working overtime and spending billions of dollars to shore up security across its platforms. And CEO Zuckerberg has gone even further, annoying just about everybody in the process, by throwing up his hands and deciding to blame regulators for. . . not regulating social media as much of they should have. If they did and would, Zuckerberg contends, Facebook wouldn’t have to make so many of those tough decisions about who should – and should not – be able to post on the site. He says, “If we were starting from scratch, we wouldn’t have to make these judgements alone.” Awww – that’s a shame. And, it’s taken him how long to come to this conclusion – ? Before things started going south, about 18 months ago, he seemed very happy to be making those decisions. Delighted, in fact. And, he went so far as to assure Congress that the company was perfectly capable of doing just that. It’s hard to imagine what they thought they were signing on for, when they set up the social media site. Maybe, clueless is the best explanation. At any rate, as the WSJ reports, “Facebook is making enemies, not friends.”