Isn’t CVS doing great right now? Didn’t many people go to drug stores during the pandemic to buy hand sanitizer, wipes and toilet paper? What about all those Covid-19 vaccines that CVS gives out?
CVS, the largest drugstore chain in the United States, cited “changes in population, consumer purchasing patterns, and future health needs” as factors leading to the decision to close the store. their.
This is why CVS will close 900 stores.
Revolving around health care
The future of CVS isn’t about selling snacks, candies, shampoos, and greeting cards. It is health care.
According to George Hill, a corporate and healthcare industry analyst at Deutsche Bank, CVS is “really pivoting and focusing on the healthcare aspects of the business”. “You want to sell high-dollar, high-margin health care services compared to greeting cards.”
Too many shops
When you walk down the street or drive around in the suburbs, you will often pass a CVS. And then hit Walgreens right next door. Rite Aid is probably pretty close too.
“There are too many pharmacies in the country and too many pharmacies. That gives CVS a reason to operate,” Hill said.
Its latest closures will “reduce store density in certain locations,” CVS said on Thursday, which means CVS has too many stores too close together in some places.
Competition from Amazon and Dollar General
While traditional pharmacies are still an important stopover for many elderly people, who either don’t use the web or don’t have access to it, they are increasingly becoming a thing of the past for the ranks of the elderly. Online shopping is increasing.
Cost increase
Closing stores also reduces CVS’s costs while preserving most of its revenue. Its labor costs and store operating costs have increased during the pandemic because of safety precautions such as plexiglass, floor decals, and masks. In August, the company said it planned to raise the minimum wage to $15 an hour from $11 in an effort to retain and attract workers.
“There is cost pressure in all directions,” said Hill, a Deutsche Bank analyst.
70% of CVS’s revenue comes from prescription drugs, but profits from that segment have declined in recent years due to lower return rates.
But when CVS closes a store, it can maintain most of those sales by shipping prescriptions to the nearest pharmacy, Hill said.
Covid-19 vaccine is not a big boost
CVS is getting an uptick from people going to its stores to buy their Covid-19 vaccines and tests. Chief Executive Officer Karen Lynch said the company has managed 43 million vaccines and about 38 million trials during an earnings call earlier this month.
But the vaccine is only a short-term profit for the company, which the company says will generate only $3 billion in revenue in 2021. That number will drop by as much as 40% next year, along with any other What sales does CVS increase as shoppers browse the aisles while they wait to get vaccinated, Lynch said.
And fewer people go to stores to buy cough and fever medicine – CVS’s big business – because they still wear masks and spend more time at home than before.
.
