CVS to close 900 stores over next three years; record charge up to $1.2 billion

CVS Health is shrinking its footprint as it looks to focus more on online growth.

The drug store retailer will close approximately 300 stores annually during the next three years “to reduce store density in certain locations.” CVS said the decision follows a review of 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 for the business.” In total, the closures represent nearly 9% of CVS’ approximately 9,900 stores. The closings will start in spring 2022.

As part of the review of its retail business, CVS said it plans to create three distinct store formats to drive higher engagement with consumers and serve as community health destinations. These include:

• Sites dedicated to offering primary care services;
• An enhanced version of HealthHUB locations with products and services designed for everyday health and wellness needs; and
• Traditional CVS Pharmacy stores that provide prescription services and health, wellness, personal care and other convenient retail offerings.

“Our retail stores are fundamental to our strategy and who we are as a company," said Karen S. Lynch, who became president and CEO of CVS Health in February 2021. "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."

In connection with the closures, CVS expects to record an impairment charge in the fourth quarter of 2021 of $1.0 billion to $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.

In addition, the company has revised its full-year 2021 earnings per share guidance to a range to $5.46 to $5.67 from $6.13 to $6.23. The company said it expects the impact to adjusted earnings per share to be immaterial in 2021 and 2022, and modestly accretive in 2023 and thereafter.

CVS confirmed its full-year 2021 adjusted earnings per share guidance range of $7.90 to $8.00. It also confirmed its full-year 2021 cash flow from operations guidance range of $13.0 billion to $13.5 billion.

The company is committed to offering impacted colleagues roles in other locations or different opportunities as part of its overall workforce strategy. These changes will begin in the spring of 2022.