CVS to Close 900 Stores and Announces New Omnichannel Strategy

CVS Health announced the implementation of a new omnichannel pharmacy strategy, with the creation of a new Chief Pharmacy Officer role, changes in executive positions, and the closure of 900 locations over the next three years.

The company said it 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 the business.

As a result of that assessment, CVS decided to reduce store density in specific locations and close approximately 300 stores a year for the next three years.

The pharmacy chain said the changes are intended to support its strategy to make health care more affordable, accessible, and convenient for consumers.

On the company’s leadership changes, CVS reported that Prem Shah was appointed to the new 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.

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“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.

Meanwhile, 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.

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. 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.
  • Traditional CVS Pharmacy stores that provide prescription services and health, wellness, personal care and other convenient retail offerings.

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.

“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.”

The company said changes to store formats and closures will begin in spring 2022.