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CVS Health will close about 900 US stores over the next three years as part of a larger shift away from retail and toward healthcare services.
On Thursday, the Woonsocket, Rhode Island-based drugstore chain said its decision — which will ultimately impact 9% of its 10,000 stores nationwide — comes after “evaluating changes in population, consumer buying patterns and future health needs.”
CVS did not disclose which locations would be shut down starting in spring 2022, nor how many employees will lose their jobs as a result, but the company said it will help those who are impacted find a different role at a nearby store.
The company said that the closures will result in a retail presence that ensures it has “the right kinds of stores in the right locations for consumers and for the business.”
As part of CVS’s effort to realign its retail strategy, the company plans to remodel some stores into destinations that offer a range of healthcare services, from flu shots to diagnostic tests. It will also keep some locations as traditional stores that fill prescriptions and sell items like milk, shampoo and cleaning products.
In a statement, CVS chief executive officer Karen Lynch said, “Our retail stores are fundamental to our strategy and who we are as a company. 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.”
According to CVS, the closures are expected to result in an impairment charge of $1.0 billion to $1.2 billion, or 56 cents to 67 cents per share, in the fourth quarter.
The move comes as the COVID-19 pandemic continues to accelerate changes in consumer behavior.
The impending closures also raise concerns about the increase of "pharmacy deserts," where consumers must travel significant distances to reach a pharmacy.
In a note to investors, Neil Saunders, retail industry analyst and managing director of GlobalData, wrote that the closures stemmed from CVS having "too many overlapping locations" and the dilapidated state of its stores that has "pushed some of them into the downward spiral of irrelevance."
"Too many stores are stuck in the past with bad lighting, depressing interiors, messy merchandising and a weak assortment of products. They are not destinations or places where people go out of anything other than necessity," Saunders said.
Over the years, drugstore chains like CVS and Walgreens built thousands of brick-and-mortar locations around the country to get closer to customer homes, but the rise of e-commerce has reduced the demand for in-person shopping, The Associated Press noted.
Even prior to the coronavirus crisis, CVS, Walgreens and Walmart had begun launching their own in-store clinics, shifting toward value-based primary care — one of the fastest segments of the healthcare industry.
Source: Equities News