CVS To Shut Down 46 Underperforming Stores In Latest Cost-Cutting Move
After reporting strong first-quarter earnings for the year, followed by a jump in its stock prices, CVS Health has announced that it will be closing a good number of its underperforming stores around the country. CVS announced that it will be closing a total of 46 stores across the United States.
While it might sound like a lot, 46 stores only account for just 1 percent of the company's total stores nationwide. CVS currently has 9,600 stores in active operation across the country. The move has been seen by some as a way for the company to further cut cost in order to boosts its numbers for the upcoming quarters. CVS reported total revenues of US$61.64 billion for the first quarter of this year, a huge jump from the US$45.74 billion it reported for the same quarter last year.
CVS's reported earnings beat initial analyst's forecasts by a good margin, with initial figures for the first quarter pegged at US$60.39 billion. Earnings per share were also above expectations at US$1.62 compared to the US$1.50 expected. This was partly boosted by the company's healthcare benefit revenues, including its CVS Silverscript business, which beat expectations at US$17.87 billion.
The firm's president and CEO Larry Merlo mentioned in a statement that the company is expected to continue the strong momentum it had started in the first quarter. The company even upgraded its full-year earnings forecast from a range of US$6.68 and US$6.88 per share to US$6.75 and US$6.90 per share. Following its upgraded 2019 earnings forecast, shares of the company's stocks jumped by 4 percent.
The company's strong forecasted full-year revenue was boosted by the company's acquisition of Aetna, a health insurance firm, late last year for US$70 billion. CVS is also planning to bolster its integration efforts by launching innovative projects such as its proposed Health HUB concept stores.
The closure of the 46 stores was included in the company's recent earnings report, labeled as "store rationalization charge." The total cost to close the company's stores was listed at US$135 million, which was also mentioned to fully take effect during the second quarter of this year.
The Rhode Island-based health retailer will be closing multiple stores in states such as Florida, Illinois, California, Alabama, New York, Michigan, Hawaii, Arizona, and Minnesota. The closed stores will also include pharmacies inside Target locations. One of the company's largest stores, a 64,000-square-foot retail store in Missouri, is also part of the stores that CVS will be shutting down.