CVS Health will close around a tenth of its approximately 10,000 retail stores over the next three years as the company converts to new store formats and adapts to changing customer needs, the Associated Press reported.
On Thursday, the company said it will close around 300 retail stores a year for the next three years as the company looks to decrease its store count density in some areas.
According to the Associated Press, CVS said it has been analyzing customer buying patterns, changes in population and future public health needs to "ensure it has the right kinds of stores in the right locations."
No details have been given as to where the closings will happen. The company said they would begin next spring.
GlobalData Managing Director Neil Saunders told the Associated Press that CVS Health has failed to give its retail business needed attention and drove several locations "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," Saunders said. "They are not destinations or places where people go out of anything other than necessity.
CVS Health said on Thursday that stores will be categorized into three models. While some will be traditional pharmacies offering a few health care services and retail products, others will focus on customer primary care. The company will use an improved version of its "HealthHUB" locations.
For more reporting from the Associated Press, see below.
The company started introducing those stores a few years ago. The stores are geared toward helping customers monitor chronic conditions like diabetes and stay on top of their health and include health care workers like dietitians as well as community rooms for things like yoga classes.
Major drugstore chains routinely close underperforming stores or shutter locations for other business needs. CVS rival Walgreens, for instance, has closed several stores in San Francisco since 2019 due partly to problems with organized retail theft.
The growth of online shopping has blunted the need for CVS and Walgreens to operate a vast network of drugstores that are just a few minutes' drive from most American homes.
Drugstores have been redesigning their locations as they try to become known as more than just places to pick up prescriptions and cough syrup. They have become a key source of COVID-19 vaccines as well as annual flu shots.
The companies have dealt with staffing issues as they widen their focus. They've raised starting pay and hired thousands of additional workers for their stores.
But customers in markets like Kansas City and Indianapolis have complained recently to local newspapers about long waits or problems getting vaccinations at some Walgreens stores because of closed pharmacies.
A Walgreens spokesman said the company is always reviewing staffing levels and trying to minimize disruption to customers when staffing shortages affect stores.
CVS Health said Thursday that it 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 2021 adjusted earnings forecast, which it raised earlier this month.
The company also said it will have an immaterial impact on adjusted earnings per share next year.
Aside from operating drugstores, CVS Health also sells health insurance and runs prescription drug plans for big clients like insurers and employers.
Shares of Woonsocket, Rhode Island-based CVS Health Corp. rose more than 2% to $95.15 Thursday afternoon while broader trading indexes were nearly flat.
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