On Thursday, CVS Health said it will close around 900 stores over the next three years. The company said that it will adjust its business to shoppers’ present tendencies to buy more online.
As a result of the announcement, CVS shares gained 2.81% to close at $95.34. For the year, CVS grew by 40%, with a current market value of $125.81 billion.
CVS Health To Focus On Digital Growth
In a news release, CVS Health said that it will focus more of its efforts on digital growth. It also plans to turn its stores into all-purpose destinations.
These will offer a range of healthcare services, including diagnostic tests and flu shots.
As part of its restructuring, CVS will start closing stores beginning in the spring of next year. For the next three years, CVS Health will close about 300 stores per year.
The projected total of 900 stores represents around 9% of the company’s 10,000 US stores. Regardless, CEO Karen Lynch said stores will continue to play a key role.
CEO Lynch Says Stores Will Still Play A Key Role
“Our retail stores are fundamental to our strategy and who we are as a company,” Lynch said in a news release.
She added that CVS Health remains focused on the “competitive advantage provided by our presence” across the United States. This complements the company’s rapidly expanding digital presence.
Prior to its announcement, CVS is already transforming more stores into healthcare destinations. The company hopes these changes will drive more customers into its stores and increase insurance claims.
CVS already operates 1,100 MinuteClinics. In addition, CVS health expanded its HealthHub-format stores. These are stores that sell more products and offer more health services.
All in all, CVS Health will use three different store formats. The first will provide MinuteClinics while the second will consist of HealthHubs.
The third one will consist of traditional stores that fill prescriptions and sell over-the-counter items. Aetna, CVS’s insurance business, will also integrate itself further into the stores.
US Health Care Market Is Disrupted
Among drugstore players on Wall Street, CVS is outperforming the rest of the field. Investors remain enamored with its focus and healthcare acquisitions.
Stock remains up by 40% this year, which outpaces the S&P 500 growth this year of 32%. CVS Health shares hit a 52-week high of $96.57 earlier this November.
With the disruptions caused by the pandemic to the industry, many of CVS’s rivals also chased market share and went into health care.
The heightened competition moved CVS and rivals Walgreens Boots Alliance and Rite Aid to look into expanding their offerings.
Many companies observed that consumers stop by drugstores for Covid-19 tests, vaccines at-home test kits, apart from their usual purchases.
Which Locations Will Close?
CVS Health has yet to disclose the specific locations of stores for closure. Spokesman TJ Crawford said that the company is currently reviewing store density and market dynamics.
Crawford also mentioned that stores with a defined population of Aetna and Caremark insurance will likely remain open. CVS will also consider the needs of communities that sorely lack a healthcare provider.
As to how many workers will lose their jobs, CVS did not say how many employees. However, it said that it will help displaced workers find a different opportunity at another location.
Meanwhile, the company will continue shaking up its business as it adjusts to the new normal. More people use online tools to get their prescriptions filled.
Many order ahead and use curbside pickup instead of dropping by the store’s insides. Plus, many patients prefer talking to their doctors via telehealth.
Watch the NewsNation Now video reporting that CVS is closing 900 locations, adding ‘new store formats’:
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