Major pharmacy chains dramatically reshaped their business strategies in 2024 as they grappled with declining profitability and an outdated retail model. Both CVS Health Corp. and Walgreens Boots Alliance made bold moves under new leadership to address ongoing challenges.
The year brought significant changes at the executive level. Tim Wentworth took the helm as Walgreens CEO and quickly announced plans to close 1,200 underperforming stores over three years, including 500 locations in 2025. At CVS, new CEO David Joyner stepped in as the company revealed plans for 270 additional store closures in 2025.
The traditional drugstore model, which aimed to be a one-stop shop for prescriptions and everyday items, faced mounting pressure. While prescription sales remained strong with both chains reporting double-digit pharmacy growth, front-of-store retail sales continued to decline. CVS saw front-end same-store sales drop throughout 2024, while Walgreens reported a 1.7% decline in retail sales.
In response, both companies expanded their private label offerings. Walgreens increased its store brand penetration to 17.1%, while CVS launched Well Market, a new private label line of better-for-you snacks and beverages.
CVS also introduced CostVantage, a new prescription pricing model based on drug acquisition costs plus set markups and service fees. The company expects full implementation by January 2025.
The transformation of these retail giants reflects broader industry challenges. According to Dave Marcotte of Kantar, "Their almost 100-year-old business model fell apart." While the companies previously sought growth through healthcare acquisitions, the fundamental retail operation remained unchanged and increasingly costly to maintain.
Industry expert Elizabeth Anderson noted cautious optimism about the new leadership and strategic shifts but emphasized there are no quick fixes: "If they had been easy problems to fix, someone over the last 10 years would have fixed them."
As 2024 drew to a close, both pharmacy chains continued their efforts to streamline operations, optimize store networks, and adapt their business models for long-term sustainability in a rapidly evolving retail landscape.
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