As part of its continued strategic shift to better serve customers and adapt to changing market conditions, CVS Health Corporation today announced plans to transform its business, including closing 900 underperforming stores nationwide. While this may sound like bad news to some, we believe it is actually a positive step towards a better future for the company and its shareholders.
Background and context
CVS Health Corporation is the leading integrated pharmacy healthcare provider in the United States with more than 10,000 retail locations and more than 300,000 employees. The company offers a wide range of products and services, including prescription drugs, over-the-counter drugs, health insurance, medical clinics and digital health solutions. CVS Health’s mission is to help people on their journey to better health, which it strives to do through its company-wide health and wellness strategy, HealthHUB.
The need for transformation
Despite its strong market position and customer loyalty, CVS Health faces several challenges and opportunities that require significant transformation to maintain its growth and competitiveness. These include:
- Increased competition from online retailers such as Amazon and Walmart, which offer lower prices and faster delivery options for essential health products;
- Changing consumer preferences towards more personalized, convenient and holistic health solutions that go beyond traditional pharmacy services;
- New technologies such as telemedicine, artificial intelligence and blockchain that have the potential to disrupt the healthcare industry and create new business models and partnerships;
- Evolving regulatory and policy frameworks such as drug pricing reforms, telehealth regulation and privacy laws require CVS Health to stay on top of and comply with new requirements.
To address these challenges and opportunities, CVS Health has developed a comprehensive transformation plan that focuses on three key areas:
- Optimizing your retail footprint. CVS Health plans to close about 900 underperforming stores nationwide, primarily in the flagship store category, which includes non-pharmacy products such as cosmetics, home goods and snacks. This will allow the company to reduce costs, streamline operations and redirect investment to higher growth areas such as HealthHUB and digital health solutions. CVS Health expects to complete the closings by the end of 2022.
- Expanding the offer of health care. CVS Health plans to accelerate the rollout of HealthHUB, its new store format that offers a wide range of health and wellness services, including chronic disease management, medication adherence, nutritional counseling and care coordination. HealthHUB also includes digital tools such as kiosks, apps and wearables that allow customers to track and monitor their health metrics and connect with healthcare providers. CVS Health aims to have 1,500 HealthHUBs in operation by the end of 2021.
- Use of your data and technological capabilities. CVS Health plans to enhance its digital health capabilities by investing in data analytics, artificial intelligence and telemedicine platforms that enable personalized, seamless and convenient healthcare for customers. CVS Health also plans to collaborate with other healthcare stakeholders such as