CVS Health plans 900 store closures, lowers guidance as retail strategy shifts digital

CVS Pharmacy
CVS Health projects an impairment charge between $1 billion and $1.2 billion through the end of the year related to the closures. (Getty/Serenethos)

CVS Health plans to shutter approximately 900 stores over the next three years, the pharmacy and retail giant announced Thursday.

Beginning next spring, the chain will close roughly 300 stores a year as the company reevaluates its in-person retail strategy with more consumers going digital.

Due to the planned store closures, the company projected an impairment charge between $1 billion to $1.2 billion through the end of the year and reduced its per-share profit guidance for 2021 to $5.46 to $5.67, down from previous projections of $6.13 to $6.23 per share.

"Our retail stores are fundamental to our strategy and who we are as a company," said Karen Lynch, president and CEO of CVS Health, in a statement. "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."

The company plans to create three new store formats, dedicated to primary care services, enhanced HealthHUB sites for everyday health needs and traditional CVS pharmacy and retail stores. 

The move comes as the chain “has been evaluating changes in population, consumer buying patterns and future health needs” to decide which types of offerings fit the needs of each community, the company said.

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Companies across the country are confronting the digital wave in healthcare as consumers increasingly turn to their phones and computers over brick-and-mortar clinics and stores.

Natalie Schibell, a senior analyst at Forrester, said a "do-it-yourself impulse" in consumers is driving on-demand digital health offerings and forcing companies like CVS Health to reevaluate their traditional models.

"This trend is giving way to more forward-thinking strategies looking to displace existing business models and operations," she said in an email statement to Fierce Healthcare. "Throughout our research we learned that consumers don't want to wait in line or visit a doctor in person if they don't need to. We've been trained by Netflix, Doordash, grocery delivery, Uber, and Amazon, etc., for instant everything."

In addition to shifting its strategy, CVS Health is also making changes to its leadership team.

Neela Montgomery, executive vice president and president of CVS Pharmacy, has chosen to leave her role at the end of the year, the company said.

"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,” Lynch said. We value the leadership she has provided during a time of evolution in our business and wish her continued success."

The company created a new executive position to oversee its changing pharmacy strategy: chief pharmacy officer.

Prem Shah, executive vice president of specialty and product innovation at CVS Health, will assume the role on Jan. 1, 2022. He will serve as co-president alongside Michelle Peluso, CVS Health executive vice president and chief customer officer.

Editor's note: This story has been updated to include analyst commentary.