Drugstore chain giant CVS Health, already shutting stores to reduce costs, now plans to lay off about 2,900 employees in a belt-tightening measure aimed at helping it slash $2 billion.
The Woonsocket, Rhode Island-based company, also facing shareholders unhappy with its performance, on Monday informed its workers about the planned job cuts. CVS said the layoffs will reduce its workforce by less than 1%.
"Our industry faces continued disruption, regulatory pressures and evolving consumer needs and expectations, so it is critical that we remain competitive and operate at peak performance," a CVS spokesman said in an email to CoStar News. "As we previously disclosed, we’ve embarked on a [multiyear] initiative to deliver $2 billion in cost savings by reducing expenses and investing in technologies to enhance how we work."
CVS is also doing a strategic review of its options, including possibly breaking up the company into separate retail and insurance units, Reuters reported Monday. The company has tapped financial advisers who have already taken on the task.
Asked to comment, the company spokesman said, “CVS Health’s management team and board of directors are continually exploring ways to create shareholder value. ... We remain focused on driving performance and delivering high quality healthcare products and services enabled by our unmatched scale and integrated model.”
The layoffs, primarily impacting corporate jobs, will help CVS "to achieve this goal and position ourselves for sustainable growth," according to the spokesman. "The reductions will not impact front-line jobs in our stores, pharmacies and distribution centers," he said.
All the major pharmacy store operators — not only CVS but also Rite Aid and Walgreens Boots Alliance — have been trying to weather financial challenges. And all three have been closing stores.
Philadelphia-based Rite Aid emerged from Chapter 11 in early September with a downsized store fleet. In November 2021, CVS said it planned to shutter 900 stores in the next few years. This year alone, it aims to shutter 315 locations, according to Coresight Research. So far 72 have happened, while 243 are not yet confirmed to have closed, Coresight said.
Drugstore chains have been plagued by shifting consumer habits, lower reimbursement rates, and heightened competition from rivals such as Amazon and Walmart.
CVS has an additional issue. The company was slated to meet with one of its major shareholders, hedge fund Glenview Capital Management, on Monday, the Wall Street Journal reported earlier. The firm's founder, Larry Robbins, reportedly wanted to suggest ways to improve operations.
Glenview didn't immediately respond to a message on LinkedIn from CoStar News seeking a comment, and CVS declined to comment on discussions with the hedge fund.
"CVS Health maintains a regular dialogue with the investment community as part of our robust shareholder and analyst engagement program," the company spokesman said. "Beyond that, we cannot comment on engagement with specific firms or individuals."
Regarding the job cuts, he added, "Before taking this step, we prioritized finding cost saving everywhere we could, including closing open job postings. Decisions on which positions to eliminate were extremely difficult and do not diminish the value that impacted colleagues have brought to the company."