(Source – MSN)
In a strategic move to optimize its store footprint and adapt to evolving market dynamics, CVS announced on Thursday its decision to close numerous pharmacies housed within Target stores early this year. The closures, scheduled to take place between February and April 2024, are part of CVS’s broader initiative to reevaluate store distribution, acknowledging shifts in population, consumer behavior, and anticipated healthcare needs.
Amy Thibault, a spokesperson for CVS to Close Pharmacy, explained in an email to CNN, “These closures are based on our evaluation of changes in population, consumer buying patterns, and future health needs to ensure we have the right pharmacy format in the right locations for patients.” The decision reflects a broader trend within the US retail pharmacy sector, grappling with challenges in the prescriptions business and a changing workforce landscape.
Major drugstore chains
The retail pharmacy industry has faced profitability challenges, exacerbated by declining foot traffic due to the ongoing impact of the COVID-19 pandemic. Consumer preferences have shifted towards online prescription services, leaving traditional brick-and-mortar pharmacies to adapt or face financial difficulties. Last year, Rite Aid, one of the country’s major drugstore chains, filed for bankruptcy, underlining the industry-wide struggle.
Despite these challenges, CVS reported robust third-quarter earnings, primarily attributed to the company’s strategic diversification away from its traditional retail focus in recent years. Sales in CVS’s health care benefits division surged by nearly 17%, while health services experienced an 8.4% growth. This shift aligns with the broader trend of pharmacies expanding their service offerings beyond traditional prescriptions.
Compounding the industry challenges are labor issues, with CVS grappling with the need to streamline its operations. The company had previously announced plans to cut thousands of jobs and close approximately 900 stores between 2022 and 2024, signaling a reevaluation of its business priorities.
Physical presence to meet changing market demands
Amy Thibault assured that, before any impacted locations are closed, prescriptions would be seamlessly transferred to nearby CVS to close pharmacies. Additionally, employees affected by the closures will be offered commensurate roles in other locations within the company, demonstrating a commitment to supporting its workforce amid changes.
The decision to close pharmacies within Target stores is particularly noteworthy, considering that CVS to close had acquired Target’s pharmacy business in 2015 for a substantial $1.9 billion. Currently operating approximately 1,800 pharmacies within Target’s 1,950 US locations, CVS’s move reflects a strategic realignment to better navigate the evolving retail and healthcare landscape.
With an extensive network of around 9,000 pharmacy locations overall, CVS appears poised to adapt to industry challenges, leveraging its diversified business segments to sustain growth while strategically optimizing its physical presence to meet changing market demands.
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