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Dive Brief:

  • CVS said this week that it plans to close some pharmacies that are located inside Target stores. The pharmacy closures will begin in February and be completed by the end of April, a CVS spokesperson confirmed to Retail Dive.
  • The closures are part of CVS’ plan to realign its national retail footprint and reduce store and pharmacy density. Employees affected by the Target store-in-store closures will be offered comparable roles within the company.
  • CVS declined to identify the locations slated for closure. The pharmacy retailer said it has about 1,800 locations inside Target stores. Prescriptions at closing locations will be transferred to a nearby CVS Pharmacy, the company said.

Dive Insight:

CVS acquired Target’s pharmacy business in 2015. The deal was worth $1.9 billion, The Wall Street Journal reported. The partnership was “a significant shift” in Target’s business model, CEO Brian Cornell said in a blog post at that time. Rather than invest its own resources into in-store healthcare, the company instead chose to rely on “an expert partner” which gave Target the bandwidth to focus on growing its overall wellness business, the company said.

“The closures are part of our plan to realign our national retail footprint and reduce store and pharmacy density and are based on our evaluation of changes in population, consumer buying patterns and future health needs to ensure we have the right pharmacy format in the right locations for patients,” CVS spokesperson Amy Thibault said in an email.

Target also has design, creative and store-in-store partnerships with brands like Apple, Disney and Starbucks. The CVS pharmacies within Target locations are run under a perpetual operating agreement and generate annual occupancy income for the big-box retailer. Target’s lease and sublease portfolio consists mainly of operating leases with CVS.

Target has about 1,950 stores in the U.S. In Q3, the retailer reported total revenue of $25.4 billion, down 4.2% from a year ago. Same-store sales for the quarter fell nearly 5%, which aligned with expectations. When reached on Friday, a Target spokesperson directed Retail Dive to CVS for comment about the pharmacy closure decision. The company also declined to say if it planned to replace the soon-to-close CVS locations with another in-store pharmacy partner.

Retailers in recent years have pushed further into offering healthcare services and products. Walmart in March said it plans to expand its health clinics, bringing the number of locations to over 75 this year. And Best Buy stepped into healthcare in 2018 when it acquired emergency response provider GreatCall for $800 million. Since then, it’s entered multiple partnerships with major health systems.

CVS in August announced that it planned to lay off 5,000 people — less than 2% of its workforce — as part of larger expense reduction measures, sister publication Healthcare Dive reported last year. Most of those jobs were corporate roles; customer-facing jobs were not affected.

For the third quarter, CVS reported revenue of $89.8 billion, up 10.6% from a year earlier. The pharmacy retailer had $3.7 billion in operating income versus a $3.9 billion loss the previous year. CVS has more than 9,000 pharmacies, including those within Target and Schnucks grocery stores, a Midwestern chain.