CVS Health will close hundreds of pharmacies over the next three years, as the healthcare giant adapts to changing customer needs and converts to new store formats
The company said on Thursday that it will close around 300 stores a year for the next three years, almost a tenth of its around 1[ads1]0,000 outlets, as it reduces store density in some places.
CVS Health said it has evaluated population changes, customer acquisition patterns and future health needs to “ensure they have the right types of stores in the right places.”
The company gave no details on Thursday about where the closures will take place. It was said that they would start next spring.
Large pharmacy chains routinely close underperforming stores or close locations for other business needs. CVS rival Walgreens, for example, has closed several stores in San Francisco since 2019, in part due to problems with organized retail theft.
The growth of e-commerce has dulled the need for CVS and Walgreens to operate a large network of pharmacies that are just a few minutes’ drive from most American homes.
CVS Health has also neglected its retail business and pushed some of its locations “into the downward spiral of irrelevance”, GlobalData CEO Neil Saunders said in an email.
“Too many stores are stuck in the past with poor lighting, depressing interiors, cluttered retail and a weak selection of products,” Saunders said in an email. “They are not destinations or places where people go out of anything but necessity.”
CVS Health said on Thursday that their stores will be grouped into three models.
Some will be traditional pharmacies that offer retail products as well as some healthcare services. Others will be dedicated to primary care for customers, and the company will break out an improved version of its “HealthHUB” locations.
The company started introducing these stores a few years ago. The stores are aimed at helping customers monitor chronic conditions such as diabetes and stay healthy. These places can include health professionals such as dieticians as well as common rooms for things like yoga classes.
The companies have addressed staffing issues as they expand their focus. They have raised their starting salaries and hired thousands of extra workers for their stores.
But customers in markets such as Kansas City and Indianapolis have recently complained to local newspapers about long waits or problems getting vaccinated at some Walgreens stores due to closed pharmacies.
A spokesman for Walgreens said the company always considers staffing levels and tries to minimize disruption to customers when staffing shortages affect stores.
CVS Health said on Thursday that it expects to charge a write-down fee of between $ 1 billion and $ 1.2 billion in the fourth quarter of the closure. This burden will not affect the company’s adjusted revenue forecast for 2021, as it raised earlier this month.
The company also said that it will have an insignificant impact on adjusted earnings per share next year.
Apart from running pharmacies and selling health insurance, CVS Health also runs prescription medicine plans for large customers such as insurance companies and employers.
The shares in Woonsocket, Rhode Island-based CVS Health Corp. rose 3% to $ 95.55 on Thursday afternoon while broader trading indices were almost flat.
Follow Tom Murphy on Twitter: https://twitter.com/thpmurphy