CVS Pharmacy, the retail division of CVS Health, on Thursday unveiled a new store design as well as an assortment of healthier food, health-focused products and expanded beauty selections. The revamped stores have 100 feet of new merchandise in health, beauty and healthier food and use a streamlined layout, according to a press release.
The effort aims to boost the drugstore’s retail operations and includes updates to its mobile experience, with new ways to order products online and pick them up with CVS Curbside, purchase using its CVS Pay app, and manage loyalty “ExtraBucks” rewards, personalized deals and manufacturer coupons on mobile.
- The company has also pledged to remove all parabens, phthalates and formaldehyde donors in products within the CVS Health, Beauty 360, Essence of Beauty, Promise Organic and Blade store brand product lines by the end of 2019. CVS has new standards for vitamins and supplements, including third-party testing of ingredient listings and product testing for certain ingredients of concern.
As rivals Walgreens and Rite Aid struggle to gain approval for their proposed merger, CVS has been quietly working to boost its retail side. The company's executives at its investor conference at the end of last year often sounded more like they were talking about a healthcare business than a retail one — and that’s proving to be a weakness.
At that December conference, CVS President and CEO Larry Merlo did say that retail presents one of the company’s biggest advantages, considering its healthcare operations are under pressure in a volatile market environment. But GlobalData Retail managing director Neil Saunders maintains CVS isn’t following through on that realization, saying on Thursday that his firm's analysts were “surprised at the complete lack of evolution in the format and the paucity of innovation” in some CVS stores.
“An attempt to dial back on front of store promotions and difficulties in driving traffic to shops diluted sales on the pure retail side,” Saunders said in a note emailed to Retail Dive earlier this year. “However, in our view, these factors are simply part of the wider malaise in CVS’s store-based business. We have, for a long while, been critical of CVS’s lack of thinking in retail — an opinion that remains largely unchanged."
In February, the company reported a fourth quarter net revenue increase of 11.7% to $46.0 billion, up from $41.1 billion in the year-ago quarter but shy of Thomson Reuters I/B/E/S estimates for $46.50 billion. Q4 revenue in CVS's retail/long-term care pharmacy increased 4.7% to $20.8 billion, largely driven by the addition of Target pharmacies acquired in December 2015, the company said. Pharmacy same-store sales were weakened by approximately 380 basis points due to recent generic introductions.
But the company is working to address retail weaknesses with a promise to boost its beauty efforts; The company recently announced the launch of a Korean beauty initiative at 2,100 stores nationwide and online. Beginning this month, more than 100 new products from seven trendy South Korean brands (some exclusive to CVS) will be available at the new CVS Pharmacy K-Beauty HQ, developed in partnership with popular Korean beauty expert Alicia Yoon, who will help curate the drugstore chain's selection of skincare and cosmetics products.
The company's healthcare focus, which includes a cessation in tobacco sales three years ago that so far its rivals have declined to emulate, appears to be a major part of its effort to revamp stores. The company announced new "discovery zones” in key health categories to guide customers toward health-based selections in food and beauty. Several Walgreens shareholders in January pressed the company to follow suit, noting CVS studies (most recently published in February) demonstrated that its decision to halt tobacco sales has led to an overall decrease in smoking among Americans. The shareholders noted the incongruence of Walgreens’ position as a healthcare provider (especially one offering products and services to help people quit smoking), and one expressed concern about damaging the Walgreens brand with ongoing tobacco sales.
CVS' assertive move to reduce chemicals in consumer products and ensure the safety of supplements is also part of its health mission. The company is also removing artificial trans fats from its exclusive store brand food products and will sell only sun care products with SPF 15 or higher, expanding products with SPF 30/broad spectrum, natural beauty brands and products focused on skin health.
Judy Sansone, senior vice president of Front Store Business and chief merchant of CVS, said in a statement on Wednesday that the moves are motivated by customers, who are increasingly focused on their health. "We did a lot of research to understand how to best serve our customers as we began to reimagine our store experience and we found that people are thinking about their health differently and taking a more proactive approach to staying well," she said. "With that in mind, we crafted a new shopping journey, all in the name of better health."