CVS Health will close hundreds of drug stores over the next three years, as the health care giant adjusts to the changing needs of customers and transitions to new store formats.
The company said Thursday that it will close about 300 stores a year for the next three years, which is about a tenth of its nearly 10,000 retail locations as it reduces the number of stores in some locations.
CVS Health said it is evaluating population changes, customer buying patterns and future health needs to “make sure it has the right types of stores in the right locations.”
The company did not release any details on Thursday as to where the closing will take place. It said they would start next spring.
Major drugstore chains regularly close poorly performing stores or shutter locations for other business needs. For example, CVS rival Walgreens has closed several stores in San Francisco since 2019, partly due to problems with organized retail theft.
The growth of online shopping has stymied the need for CVS and Walgreens to operate vast networks of drug stores that are only a few minutes’ drive from most American homes.
CVS Health has also neglected its retail business and pushed some of its locations to the “bottom of irrelevance,” Neil Saunders, managing director of GlobalData, said in an email.
“A lot of stores have been stuck in the past with poor lighting, depressing interiors, messy merchandise and a lackluster assortment of products,” Saunders said in an email. “They are not destinations or places where people go out of anything other than necessity.”
CVS Health said on Thursday that its stores would be divided into three models.
There will be some traditional pharmacies that offer retail products as well as some health care services. Other customers will be dedicated to primary care, and the company will build an enhanced version of its “HealthHub” locations.
The company started offering those stores a few years back. The stores are geared to help customers monitor chronic conditions like diabetes and stay on top of their health. Those spaces can include health care workers such as dietitians as well as community rooms for things like yoga classes.
Companies have dealt with staffing issues as they increased their focus. They have raised starting salaries and hired thousands of additional employees for their stores.
But customers in markets such as Kansas City and Indianapolis have recently complained about long waits from local newspapers or problems receiving vaccinations at some Walgreens stores due to closed pharmacies.
A Walgreens spokesperson said the company is always reviewing staffing levels and trying to minimize disruption to customers when staff shortages affect stores.
CVS Health said Thursday that it expects to charge between $1 billion and $1.2 billion in impairment charges in the fourth quarter for the closure. The charge will not affect the company’s 2021 adjusted earnings forecast, which it raised earlier this month.
The company also said that it will have no impact on adjusted earnings per share next year.
In addition to operating drug stores and selling health insurance, CVS also runs prescription drug plans for large clients such as health insurers and employers.
Shares of Woonsocket, Rhode Island-based CVS Health Corp rose 3% to $95.55 on Thursday afternoon, while the broader trading index was nearly flat.
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