CVS Health will shut down 900 underperforming stores and trim about 5,000 jobs as it shifts its focus to digital and physical connections across all its stores and distribution systems, the company announced Tuesday.
The closures are part of a broader downsizing in the physical pharmacy business that will cost CVS between $1.5 billion and $2 billion, not including related costs.
The company will be reducing inventory and selling properties, while also exploring the sale of some stores. CVS has completed nearly 300 store sales so far. The stores closing will be operated by its third-party pharmacy benefit managers, or PBMs, which will subcontract with pharmacies outside the CVS network.
“Taking these steps is the culmination of over 20 years of growth and transformation as we pioneered new ways to improve health and drive value,” Chairman and CEO Larry Merlo said in a prepared statement.
CVS has been remodeling its stores in recent years, and for most of those changes, that meant smaller, more flexible, space for digital health programs and other services. CVS is also investing heavily in its HealthONE network of digital health clinics.
This past December, CVS acquired Aetna, a major pharmacy benefits manager with nearly 12 million members, for $69 billion. CVS said at the time that CVS health would form a healthcare group that would serve about 300 million people, and would have more than 1,200 clinics in CVS and Aetna locations.
All those moves have been viewed by some investors as efforts to take on the pharmaceutical companies themselves, which are attempting to provide more services. But CVS is also trying to beat back newcomers, like Amazon, in the retail pharmacy space.
CVS recently changed its name to CVS Health, and the company has at times been talked about as a possible merger partner for a like-minded health entity, like JPMorgan Chase. CVS executives also recently said they would look at lowering prescription drug prices — in line with the government’s latest push for prescriptions to be cheaper.
The CVS closures will affect about 20% of the nearly 4,000 U.S. locations for the chain. The company has been profitable in recent quarters, but this is its biggest round of store closures ever.
“In addition to our goals of improved retail operations, reduced inventory and savings through streamlining our infrastructure, our intent to divest non-core assets will enable us to pursue our long-term growth strategy and increase focus on growth initiatives while enhancing our ability to effectively allocate capital,” said Catherine Nash, CVS vice president of corporate communications.
CNN Business’ Kelli Bender contributed to this report.