Why's CVS Ditching the Pharmacies Inside Target Stores?
Gotta Roll With the Punches
Pharmacies within Target retail outlets will be shutting down, according to the announcement made by CVS Health.
CVS decided to terminate some of its pharmacies situated within Target retail outlets. Starting next February, the liquidation process will take place, wrapping up by April's end – confirms a representative from CVS to Retail Dive.
Adapting to the Changing Tide
This move is part of CVS' strategy to rejig its national retail structure, lessening both store and pharmacy density. Employees from these Target's in-store pharmacies will be granted equivalent positions within the company. However, CVS won't unveil the specific locales on the chopping block – they've got about 1,800 locations nestled within Target stores. Prescriptions from closed locations will be handed over to a neighboring CVS Pharmacy, assures the company.
Jumping on the Bandwagon
Back in 2015, CVS gobbled up Target's pharmacy business for a hefty $1.9 billion, as The Wall Street Journal uncovered. CEO Brian Cornell dubbed it a "significant shift" in Target's business model. Rather than investing hefty resources into in-store healthcare, the company opted for a partnership with an "expert partner", which freed up space for Target to focus on amplifying its overall wellness biz, as they claimed.
Making Strides Towards Change
In an email, CVS spokesperson Amy Thibault clarified, "The closures are part of our plan to realign our national retail footprint and reduce store and pharmacy density and 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."
Cat's Out of the Bag
Target also boasts design, creative, and in-store partnerships with various brands such as Apple, Disney, and Starbucks. The CVS pharmacies within Target outlets run under a perpetual operating agreement, pumping annual occupancy income for the big-box retailer. Target's lease and sublease portfolio predominantly consists of operating leases with CVS.
The Numbers Game
Target operates approximately 1,950 stores within the U.S. In Q3, the retailer nabbed a total revenue of $25.4 billion, a 4.2% descent compared to a year ago. Same-store sales dipped nearly 5%, mirroring predictions. When contacted on a Friday, a Target spokesperson redirected Retail Dive to CVS for comment about the pharmacy closure decision. There was no word on whether they were considering alternative in-store pharmacy partners.
Taking a Steep Dive
Retailers have lately dived deep into offering healthcare services and products. In March, Walmart announced plans to extend its health clinics, aiming for over 75 locations this year. Since 2018, Best Buy has acquired emergency response provider GreatCall and partnered with major health systems to step into the healthcare sector.
Balancing the Books
CVS disclosed it would let go of 5,000 individuals – a mere 2% of its workforce – as part of larger cost-saving efforts in August 2020. Majority of these roles were corporate positions; customer-facing roles remained undisturbed.
Keeping Their Cool Under Pressure
In Q3, CVS hit a revenue of $89.8 billion, growing 10.6% year-over-year. The pharmacy retailer bagged $3.7 billion in operating income, a significant swing from the $3.9 billion loss they suffered the previous year. CVS operates more than 9,000 pharmacies, including those situated inside Target and Schnucks grocery stores, a Midwestern chain.
- The decision by CVS to close some of its pharmacies within Target stores is part of their strategy to adapt to changes in the industry, aimed at reducing store and pharmacy density.
- CVS will be offering equivalent positions within the company to employees from the affected Target's in-store pharmacies.
- The closure of these CVS Pharmacies inside Target stores is based on CVS' evaluation of changes in population, consumer buying patterns, and future health needs.
- Target has been partnering with brands such as Apple, Disney, and Starbucks, and the CVS pharmacies within their stores run under a perpetual operating agreement, generating annual occupancy income for Target.
- In the healthcare sector, retailers like Walmart are also making strides, planning to extend their health clinics to over 75 locations this year.
- CVS, which operates over 9,000 pharmacies nationwide, had to let go of 5,000 employees as part of their cost-saving efforts in August 2020, but customer-facing roles remained undisturbed.
