CVS Health announces 900 Stores Closing over 3 Years
CVS Health (NYSE: CVS) last week announced several steps to support its strategy of making health care more affordable, accessible and convenient for consumers. The process will see around 900 stores closing over the next three years as the pharmacy chain adjusts to “changes in population, consumer buying patterns and future health needs.”
Prem Shah has been named to the newly created role of Chief Pharmacy Officer and will oversee the omnichannel pharmacy strategy, effective immediately. On January 1, 2022, Shah and Michelle Peluso will become Co-Presidents of CVS Health’s retail business, with Peluso overseeing front-store strategy and operations. Shah joined CVS Health in 2013 and is currently Executive Vice President, Specialty Pharmacy and Product Innovation. Peluso joined CVS Health in 2021 as Executive Vice President and Chief Customer Officer.
“Prem and Michelle are ideally suited for their new roles and will be instrumental to CVS Health as we continue to execute against our strategy of delivering an integrated health care experience centered around the consumer,” said Karen S. Lynch, President and CEO of CVS Health.
Shah will report directly to Lynch in his new role, and Peluso will continue to report directly to Lynch.
In connection with the changes announced , Neela Montgomery, currently Executive Vice President and President, CVS Retail/Pharmacy, has decided to leave the company. Montgomery will remain in her role until the end of 2021, ensuring a smooth transition of responsibilities.
Lynch added, “We appreciate Neela’s contributions during an incredibly challenging and dynamic period when our retail stores played a critical role in the country’s fight against COVID-19. We value the leadership she has provided during a time of evolution in our business and wish her continued success.”
As part of the company’s strategic review of its retail business, CVS Health will also create new store formats to drive higher engagement with consumers. The closures will represent roughly nine percent of the company’s total retail locations. The restructuring which is dubbed “omnichannel health strategy” will see the development of three different store models which will serve as community health destinations.Three distinct models will serve as community health destinations:
- Sites dedicated to offering primary care services;
- An enhanced version of HealthHUB locations with products and services designed for everyday health and wellness needs; and
- Traditional CVS Pharmacy stores that provide prescription services and health, wellness, personal care and other convenient retail offerings.
The company has been evaluating changes in population, consumer buying patterns and future health needs to ensure it has the right kinds of stores in the right locations for consumers and for the business. As part of this initiative, CVS Health will reduce store density in certain locations and close approximately 300 stores a year for the next three years. The company is committed to offering impacted colleagues roles in other locations or different opportunities as part of its overall workforce strategy. These changes will begin in the spring of 2022.
“Our retail stores are fundamental to our strategy and who we are as a company,” said Lynch. “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.”
In connection with the planned store closures, the company expects to record an impairment charge in the fourth quarter of 2021 of between $1.0 billion and $1.2 billion or between $0.56 and $0.67 of diluted earnings per share related to the write down of operating lease right-of-use assets and property and equipment. As a result of the planned store closures, the company has revised its full year 2021 GAAP EPS guidance range to $5.46 to $5.67 from $6.13 to $6.23. These impairment charges are excluded from the company’s calculation of Adjusted EPS. The company expects the impact to Adjusted EPS to be immaterial in 2021 and 2022, and modestly accretive in 2023 and thereafter. The company confirms its full year 2021 Adjusted EPS guidance range of $7.90 to $8.00 and confirms its full year 2021 cash flow from operations guidance range of $13.0 billion to $13.5 billion.