CVS to close 70 stores in the coming months…

Dive Brief:

  • Speaking at its analyst day event Thursday, CVS Health executives outlined their long-term strategy for growth, which includes closing 70 stores in the coming months.

  • The drugstore retailer’s overall cost-cutting plans aim for $3 billion in savings from 2017 to 2021.

  • In addition to store closures, CVS Health CFO Dave Denton said the company is finding efficiencies in corporate shared services that promise to drive down labor costs by 15% to 20%. For retail, that might include instructing overnight pharmacists to provide data entry during the slow hours, he said.

Both Denton and CVS Health CEO Larry Merlo Thursday sought to reassure investors that the company’s integrated model of health care services, which includes retail pharmacy, pharmacy benefit management and clinical care, remains a highly competitive one, with better opportunities for growth, despite anticipated changes in heath care policy (and despite the loss of its Tricare military services contract to rival Walgreens). The company reaffirmed its guidance for fiscal years 2016 and 2017, missing expectations from Thomson Reuters I/B/E/S, and now expects diluted earnings for FY2016 range between $4.82 and $4.88 per share in 2016 (below the $5.81 per share view from Thomson Reuters I/B/E/S) and for FY2017 to range between $5.02 and $5.18 (below the $5.87 view from Thomson Reuters I/B/E/S).

While CVS executives often sounded more like they were talking about a healthcare business than a retail one, it’s the retail business that presents one of the company’s biggest advantages in a market that is increasingly sensitive to consumers as well as payers, according to Merlo.

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