CVS Health will close hundreds of drugstores over the next three years, as the retail giant adjusts to changing customer needs and converts to new store formats.
The company said Thursday that it will close about 300 stores a year for the next three years as it looks to reduce store count density in some locations.
The closures amount to nearly 10% of the roughly 10,000 retail locations CVS Health operates.The decision “seems odd” partly because some rivals are seeking to open brick-and-mortar locations at the moment, noted Neil Saunders, managing director of GlobalData, in a Thursday research note.But the closures come as CVS has failed to upgrade its locations, he added.
“Today the retail side of CVS’s business is shabby,” Saunders said.”Too many stores are stuck in the past with bad lighting, depressing interiors, messy merchandising and a weak assortment of products.”
He added, “They are not destinations or places where people go out of anything other than necessity.”
CVS will need to invest in its retail locations and health care services, such as its insurance and prescription drug plans for big clients like insurers and employers, to ensure its future, he added.
The company expects to take an impairment charge of between $1 billion and $1.2 billion in the fourth quarter for the closures.That charge won’t affect the company’s earnings forecast.
“Our retail stores are fundamental to our strategy and who we are as a company,” Karen Lynch, President and CEO of CVS Health, said in a press release.
“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.”
Drugstore chains like CVS and Walgreens built thousands of locations around the country to get closer to consumer homes.
But in recent years, the explosive growth of online shopping has blunted the demand for such in-person convenience.
Shares of Woonsocket, Rhode Island-based CVS Health Corp.rose over 2% Thursday while broader trading indexes dipped.
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