CVS Plans Chain of Smaller-Footprint Pharmacy-Focused Stores

CVS is reportedly opening 12 smaller-footprint locations focused more on healthcare than consumer products.

As The Wall Street Journal (WSJ) reported Sunday (March 9), the new stores will feature full-service pharmacies but limited retail.

These stores, the report said, will be — on average — under 5,000 square feet, making them not even half the size of a typical CVS. The stores are expected to open this year around the U.S.

A spokesperson for the company told WSJ the stores will still feature health products like over-the-counter medication and first aid products, but will not stock the snacks, stationary and beauty products typical at most CVS locations.

As the WSJ noted, pharmacy chains have been struggling to compete with discount retailers while also combating a rise in shoplifting. This has led these companies to cut costs, shutter stores and make other drastic changes.

In the case of CVS, that means undertaking a store closure plan announced in 2021. Since then, the company has shut down 800 locations, with plans for an additional 270 this year.

Rival Walgreens, meanwhile, has been closing stores. The company said this week it was being acquired by an entity affiliated with private equity firm Sycamore Partners.

Julie Utterback, senior equity analyst for Morningstar, told WSJ that the new CVS store format is surprising, considering the company’s larger downsizing efforts. However, shifting its real-estate focus to the health side of the business makes sense, she added, as 80% of the company’s sales last year were from the pharmacy department.

“That is where most of the value is generated,” Utterback said. “The front of their store operations has been in question for a while.”

CVS last year hired advisers to conduct a strategic review of its operations. As PYMNTS wrote at the time, experts say the company has found itself in a difficult situation amid rising competition from both brick-and-mortar and online retailers when it comes to prescription medication and retail goods.

“And while they’ve been looking at their private labels to increase sales, the store model itself isn’t necessarily a go-to for consumers,” Greg Zakowicz, senior eCommerce expert at Omnisend, said in an interview with PYMNTS.

“I think their in-store retail sales will continue to be more convenient for those already in-store, which isn’t great for sustainable long-term growth. Layer on constantly increasing insurance costs and downgraded star rating from Medicare Advantage, and it’s difficult to see a clear way forward.”