CVS Closing Dozens of Pharmacies Inside Target

[veteran+]

CVS is CVS and everyone knows what kind of company it is. I don't think I have ever heard a positive comment about CVS from anyone (customer, employee and "private comments" from the retail trade writ large).

This is all on Target. They keep on making these unwise decisions that backfire!

[rwsandiego]

I had hinted that the relationship was not great... I wonder if Target will attempt to get back into the pharmacy business and this will be the beginning of phasing out CVS? It's tough to get back into the business at this point though.

The Target pharmacists I know said that they lost a lot of business after converting to CVS. No reason to go there if there's a CVS closer to home.

Not to mention the customers who switched to different pharmacy chains, such as supermarkets. The Target pharmacy I used was always very busy. After CVS took over, I switched to VONS. The pharmacist at that store mentioned customers switched away from CVS because they don't like CVS.

I'm not certain that the closure of Target/CVS pharmacies will have much of an effect on sales at the impacted stores. The pharmacies in the Phoenix Target stores I shop never seem to have customers. If a pharmacy is closed due to a lack of business, then the Target won't have very many customers to lose.

[wnetmacman]

If the front end was profitable, then why are all the chains cutting it to minimum assortment, jacking up prices to sky high, all self checkouts, and piloting what are in effect pharmacy only stores? Obviously they are not making money there these days due to higher labor costs and margin pressures that volume competitors like Walmart and Target don't have.

That's the problem - front store is NOT profitable. And when you have a pharmacy outside the store close by with better convenience, why use the same store inside Target.

Target pharmacy did just fine and they lost a lot of business when converting them to CVS. They weren't super busy, but now you rarely see customers at the pharmacy especially since CVS cut back the hours. It is a bad partnership because CVS is a bad operator that wants to operate at a very low service level. When they took over Target pharmacy the first thing they did was either lay off workers or transfer them to understaffed CVS stores they didn't want to go to. Now that more Targets are going to be left without a pharmacy this is going to really become a deal they regret. I wonder if they have a full non compete agreement, or if Target can reopen these closed pharmacies. If they operate them the same way they did before (plus learn the dirty tricks like not ordering money losing drugs) they will easily be able to recruit unhappy CVS and Walgreens pharmacists and staff.

Target pharmacy did not do just fine. Why do you think Target sold them off? Because they were bleeding money. A Target without a pharmacy will be just like any other Target. And I doubt CVS's agreement would allow them to reopen one.

[ClownLoach]

If the front end was profitable, then why are all the chains cutting it to minimum assortment, jacking up prices to sky high, all self checkouts, and piloting what are in effect pharmacy only stores? Obviously they are not making money there these days due to higher labor costs and margin pressures that volume competitors like Walmart and Target don't have.

That's the problem - front store is NOT profitable. And when you have a pharmacy outside the store close by with better convenience, why use the same store inside Target.

Target pharmacy did just fine and they lost a lot of business when converting them to CVS. They weren't super busy, but now you rarely see customers at the pharmacy especially since CVS cut back the hours. It is a bad partnership because CVS is a bad operator that wants to operate at a very low service level. When they took over Target pharmacy the first thing they did was either lay off workers or transfer them to understaffed CVS stores they didn't want to go to. Now that more Targets are going to be left without a pharmacy this is going to really become a deal they regret. I wonder if they have a full non compete agreement, or if Target can reopen these closed pharmacies. If they operate them the same way they did before (plus learn the dirty tricks like not ordering money losing drugs) they will easily be able to recruit unhappy CVS and Walgreens pharmacists and staff.

Target pharmacy did not do just fine. Why do you think Target sold them off? Because they were bleeding money. A Target without a pharmacy will be just like any other Target. And I doubt CVS's agreement would allow them to reopen one.

Well like it or not Target pharmacy did a heckuva lot better than CVS Pharmacy at Target. And if Target pharmacy was unprofitable then it wouldn't have brought any financial return.

Furthermore, here is the proof Target pharmacy was not losing money. The business was delivering half a billion per quarter and breaking even - as they stated the exit was EBIT neutral and revenue negative meaning they did NOTHING to improve the overall business by selling it. Target was still in trouble at that time and needed cash. This was a one time cash injection. Target was hurting, the pharmacy was not contributing to the company's losses. As mentioned in discussions of other retailers, this was more of a convenience service for the customers so breaking even and bringing in $500M per quarter was a positive for the business. If Target wasn't having more serious company financial problems I doubt they would have made this $1.9B cash grab. They would have sold any good part of the business to address their financial troubles as they had just lost billions on the Canada debacle and lost massive sales resulting in huge store level reduction in force from the data breach.

https://corporate.target.com/news-featu ... n-complete

The sale occurred in the aftermath of the big data breach, garden center exits, and Canada failure, and was part of a shortly thought out idea that Target would consider a bunch of store-within-a-store concepts and was the biggest change that came from that corporate strategy change attempt. They tested a fully outsourced electronics department, the CVS deal, and had more to come but none of these really worked out as Target wanted more control. You'll notice the current Starbucks and Ulta deals are fully operated by Target people, that is ultimately the way they've decided they want things to be. Remember that Target has this strange psychological and cultural thing that they feel they are superior operators in every way to other retail entities... That never mixed well with the idea of inviting in others.

The CVS people were apparently pissed as sales went down instead of up at the Target pharmacies, they thought hanging their sign would be good for business purposes. They aggressively questioned the pharmacists we know about why sales became so bad.

I think they expected they would be able to shed CVS stores near Target stores to save costs and move the files into the Target, but instead they got an exodus of the Target pharmacy customers that emptied these files.

The other really bad thing about losing Target pharmacy was that they developed and trained a lot of people, including company paid professional development, which resulted in Target employees making the career decision to move into pharmacy. They had their own pipeline of people being developed from within (outside of the pharmacist of course) and that's why you saw much better staffing inside their pharmacies. In their absence, the pharmacy staffing problems in the industry have only become worse as Target was basically manufacturing pharmacy employees.

In a nutshell, now Target is in a relative position of financial strength as they are a decade past all the mess of Canada and data breaches, and since the business was worth $2B a year it would be a worthwhile effort to reopen pharmacies if they can where CVS has chosen to exit. CVS is just a glorified tenant and I can't imagine that if they leave they maintain the rights to the pharmacy at that store, as if it should be sitting vacant forever like a shrine. Similar situations are Banfield exiting many PetSmart locations, and PetSmart choosing to develop their own internal vet offering to take that spot. Now some PetSmart stores have Banfield, others have PetSmart Veterinary.

[Alpha8472]

CVS pharmacists and other pharmacy personnel are in fear of their jobs right now. I heard from pharmacists working at CVS that they are looking for new jobs. The pharmacy closures continue and pharmacists and other pharmacy workers are leaving CVS.

I work for a competing pharmacy and we got 74 applicants fighting for 1 pharmacist position.

This is making the pharmacist shortage at CVS worse. CVS set themselves up for an even bigger pharmacist shortage.

CVS/Caremark sees that the money is to be made on the Caremark side with insurance and PBMs. They are closing down more and more brick and mortar pharmacies.

Perhaps CVS/Caremark wants to split the company. Separate into a profitable insurance side and let the pharmacies separate into a different company to be run separately or sold off.

[ClownLoach]

CVS pharmacists and other pharmacy personnel are in fear of their jobs right now. I heard from pharmacists working at CVS that they are looking for new jobs. The pharmacy closure continue and pharmacists and other pharmacy workers are leaving CVS.

I work for a competing pharmacy and we got 74 applicants fighting for 1 pharmacist position.

This is making the pharmacist shortage at CVS worse. CVS set themselves up for an even bigger pharmacist shortage.

CVS/Caremark sees that the money is to be made on the Caremark side with insurance and PBMs. They are closing down more and more brick and mortar pharmacies.

Perhaps CVS/Caremark wants to split the company. Separate into a profitable insurance side and let the pharmacies separate into a different company to be run separately or sold off.

With the way CVS is operating it would make sense that they would just sell all the Target locations back to them and walk away. They could accomplish closing 1800 locations (and get accolades from the Wall Street Vultures) and replenish the supply of pissed-off pharmacists who have left other locations by moving all the employees to regular CVS stores. Of course, once the job listings go up for reopening Target pharmacy they will fill every position nationwide in a day with CVS and Walgreens people who want out. From a retail perspective, in those 9 years since the deal the fortunes of both companies have reversed. CVS retail seems to be struggling while Target has nearly doubled their revenues (with overall growth far beyond the rate of inflation). I'm sure Target has all the software and systems still available and could easily "flip the switch" to reopen their pharmacy division as they would likely see much if not all of the leadership that went to CVS happily return to their much better operated company.

[storewanderer]

This is interesting because I see a lot more action at CVS inside Target than I ever saw at Target Pharmacy. Target Pharmacy never had much going on; it usually had 2-3 employees and rarely any line. They seemed to have sort of short hours (but so does CVS inside Target) also. Target Reno Pharmacy did a file buy when the Reno Kietzke Safeway closed (which was a moderate volume pharmacy) but I am not sure how many of those files they actually retained. I recall going to Target Pharmacy and basically getting a prescription filled while I stood there, like, it only took a few minutes, once during the day (usually that is the sort of thing you could try at night at other pharmacies, wouldn't always work), and I remember the neat lid on the bottle.

I attribute the additional traffic I see at CVS inside Target to the fact that around Reno the CVS units are so backed up that customers who need a prescription urgently get desperate. The Target units are the "least busy" CVS units so more customers go there so they don't have to wait 4 hours for a prescription at another CVS; at the Target CVS they only may have to wait 1.5-2 hours.

CVS has made so many random acquisitions and just keeps piling on the debt like there is no tomorrow. They have definitely built a "too big to fail" empire. I could see it split up due to being too difficult to effectively manage as a single company.

[veteran+]

Every Target I have visited had a very busy Target Pharmacy.

Not so with CVS inside Target, and I have been in many Targets since I never ever go to Walmart.

[ClownLoach]

Every Target I have visited had a very busy Target Pharmacy.

Not so with CVS inside Target, and I have been in many Targets since I never ever go to Walmart.

How much of this do you think is related to the fact that we are observing California locations? I think it's pretty obvious that nobody was happy when CVS took over and destroyed the well-liked Sav-On and Longs chains, and that likely drove a lot of traffic to alternatives like Target before they too were sucked into the CVS cesspool.

[veteran+]

My observations include Colorado and Florida.

But, I get your point.