By TOM MURPHY
Updated: November 18, 2021 04:01 PM
Created: November 18, 2021 10:29 AM
CVS Health will close hundreds of drugstores over the next three years, as the health care giant adjusts to changing customer needs and converts to new store formats.
The company said Thursday that it will close about 300 stores a year for the next three years, nearly a tenth of its roughly 10,000 retail locations as it reduces store count density in some places.
CVS Health said it has been evaluating population changes, customer buying patterns and future health needs to "ensure it has the right kinds of stores in the right locations."
The company also has been expanding the health care services it provides at many locations.
The closings make sense as CVS Health seeks to remake many stores into more of a "one-stop shop" for care, Edward Jones analyst Ashtyn Evans said, adding that the company's Aetna health insurance business should steer customers to those stores.
The company released no details Thursday on where the closings will occur. It did say they would start next spring.
Major drugstore chains routinely close underperforming stores or shutter locations for other business needs. CVS rival Walgreens, for instance, has closed several stores in San Francisco since 2019 due partly to problems with organized retail theft.
The growth of online shopping has blunted the need for CVS and Walgreens to operate a vast network of drugstores that are just a few minutes' drive from most American homes.
CVS Health also has neglected its retail business and pushed some of its locations "into the downward spiral of irrelevance," GlobalData Managing Director Neil Saunders said in an email.
"Too many stores are stuck in the past with bad lighting, depressing interiors, messy merchandising, and a weak 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 Thursday its stores will be grouped into three models.
Some will be traditional pharmacies that offer retail products as well as some health care services. Others will be dedicated to customer primary care, and the company will break out an enhanced version of its "HealthHUB" locations.
The company started introducing those stores a few years ago. The stores are geared toward helping customers monitor chronic conditions like diabetes and stay on top of their health. Those locations can include health care workers like dietitians as well as community rooms for things like yoga classes.
Drugstores have been redesigning their locations as they try to become known as more than just places to pick up prescriptions and cough syrup. They have become a key source of COVID-19 vaccines as well as annual flu shots.
The companies have dealt with staffing issues as they widen their focus. They've raised starting pay and hired thousands of additional workers for their stores.
But customers in markets like Kansas City and Indianapolis have complained recently to local newspapers about long waits or problems getting vaccinations at some Walgreens stores because of closed pharmacies.
A Walgreens spokesman said the company is always reviewing staffing levels and trying to minimize disruption to customers when a staffing shortages affect stores.
CVS Health said Thursday that it expects to take an impairment charge of between $1 billion and $1.2 billion in the fourth quarter for the closures. That charge won't affect the company's 2021 adjusted earnings forecast, which it raised earlier this month.
The company also said it will have an immaterial impact on adjusted earnings per share next year.
Aside from operating drugstores and selling health insurance, CVS Health also runs prescription drug plans for big clients like insurers and employers.
Shares of Woonsocket, Rhode Island-based CVS Health Corp. rose 3% to $95.55 Thursday afternoon while broader trading indexes were nearly flat.
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