People walk by a CVS Pharmacy store in the Manhattan borough of New York City.
Shannon Stapleton | Reuters
CVS Health said Thursday that it will close about 900 stores over the next three years, as it adjusts to shoppers who are buying more online.
The company announced in a news release that it will focus more of its efforts on digital growth and turning its stores into destinations that offer a range of health-care services, from flu shots to diagnostic tests.
Store closures will begin in spring 2022. The company said it plans to close about 300 per year. In total, the closures will add up to roughly 9% of CVS’ nearly 10,000 U.S. stores. The company declined to share the specific locations of stores that will shutter.
CVS did not say how many employees will lose their jobs because of the closures, but said it will help those who are impacted find a different opportunity or a role at another location.
CVS is shaking up its business as the pandemic accelerates changes in consumer behavior. More people are getting prescriptions filled online, retrieving personal care items through curbside pickup and visiting with doctors through telehealth. The drugstore chain and health insurer said it is closing the stores based on changes to the population, consumer habits and health needs.
Going forward, CVS said it will have three different store formats to better engage customers. One group of stores will offer primary care services. Another will become HealthHubs, a new kind of store that has products and services health needs like treating common illnesses like strep throat, screening for chronic conditions like type 2 diabetes and providing services like therapist appointments for mental health. A third group will remain traditional stores that fill prescriptions and sell items from shampoo to milk.
“Our retail stores are fundamental to our strategy and who we are as a company,” CEO Karen Lynch said in a news release. “We remain focused on the competitive advantage provided by our presence in thousands of communities across the country, which complements our rapidly expanding digital presence.”
Along with revamping its stores, CVS has been weaving them together with its health insurance business, Aetna. It acquired Aetna in 2018. Some of its benefits plans encourage Aetna members to seek care at CVS stores, like going to its urgent care locations — called MinuteClinics — for no or a low co-pay.
It also owns prescription benefit management subsidiary, Caremark.
CVS spokesman T.J. Crawford said along with reviewing store density and market dynamics, the company also decided which stores would stay open or closed based on the number of people with Aetna and Caremark coverage nearby. He said it also considered the needs of underserved communities.
CVS said it expects to record an impairment charge of between $1 billion and $1.2 billion, or 56 cents to 67 cents per share in the fourth quarter tied on the planned store closures. The writedown covers the cost of operating leases, property and equipment.
As a result, it expects earnings in the range $5.46 to $5.67 per share. It previously forecast earnings of between $6.13 and $6.23. Its adjusted earnings per share guidance remains the same, since the impairment charges will not be factored in.
CVS is also changing some of its leadership roles. It has created a new role, chief pharmacy officer, and named Prem Shah to the position. Shah and Michelle Peluso, chief customer officer, will become co-presidents who will lead the two parts of company’s retail business — the front of the store and the pharmacy. Both will report to Lynch, who stepped into the top leadership role in February.
Neela Montgomery, president of CVS Retail/Pharmacy, will leave the company at the end of 2021.
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