CVS is getting experimental.
The retail pharmacy giant confirmed in March plans to open a dozen small-format pharmacies in “select communities nationally” by the end of 2025. The stores will be less than 5,000 square feet on average, with a full pharmacy and limited over-the-counter items, CVS spokesperson Amy Thibault said in a statement sent to Healthcare Brew.
“The new pharmacies will be introduced in select neighborhoods to help bridge gaps in care and make it easier for patients to access medications, immunizations, and other pharmacist-provided healthcare services,” Thibault said.
CVS is in a period of change as it attempts to course correct from 2024, when its net income plummeted 45% from $8.4 billion to $4.6 billion. Other recent developments include naming new executives and announcing a potentially lucrative partnership with Novo Nordisk.
However, some analysts don’t think the small-store experiment will make a big splash for CVS.
Talking strategy
Small-format stores make sense for retail pharmacies like CVS to “try to meet unmet needs, such as in pharmacy deserts,” Julie Utterback, senior equity analyst at investment research firm Morningstar, told Healthcare Brew. Roughly 34 million adults in the US live in areas with limited access to pharmacies, according to a 2024 study from the Fred Hutchinson Cancer Center and University of Washington, Seattle.
It’s a good thing CVS is focusing on the pharmacy part of the business rather than retail since that’s what’s been driving the most revenue, according to Utterback. But the move still means opening more locations, which she thinks may pose “significant challenges more broadly for the long run.”
Utterback said she was surprised CVS announced a strategy that involves opening more stores when the company has been in the process of reducing its footprint. In 2024, executives announced the company would close 10% of its roughly 9,000 locations, and in February 2025, the company said it would shutter an additional 270 stores this year.
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However, Thibault said CVS plans to open nearly 30 additional regular-size stores this year on top of the dozen small-format stores, including pharmacies located inside Target stores.
Even with the small-format stores, “CVS will still need to invest more in making its larger store formats more efficient,” Utterback said.
Plus, a dozen stores isn’t enough to make much of a dent for the company overall, Elizabeth Anderson, senior managing director at investment banking advisory firm Evercore, told Healthcare Brew.
“[CVS] should be experimenting because consumer preferences change. They might have some things that work out in urban locations but not suburban locations, or vice versa,” she said. “I think it’s probably too small and too soon to make any conclusions, but they should be thinking through these things regularly.”
Been there, done that
Rite Aid tried a similar move, opening at least four small-format stores in Virginia starting in November 2022.
Executives at the time said the goal was to improve pharmacy access. Rite Aid’s then-CEO Heyward Donigan said in a December 2022 earnings call that the smaller stores would be a “core driver” of growth for the company.
However, Rite Aid filed for bankruptcy less than a year later in October 2023. And the company filed for a second bankruptcy on May 5, with plans to sell “substantially all of its assets,” according to a company press release.
With a lack of publicly available information after 2023, it’s unclear how Rite Aid’s small-format stores performed or how many of them remain open. At least one that opened in April 2023 in Craigsville, Virginia, is no longer listed on the company’s website.
Rite Aid did not respond to Healthcare Brew’s request for an interview regarding small-format store performance.