After CVS Health (CVS) recently revealed in its latest earnings report that it has been struggling with shrinking profits in multiple areas of its business, the company revealed a major cost-cutting move, and it may consider making other harsh changes in the future.
The pharmacy chain said that it will lay off 2,900 workers nationwide, less than 1% of its workforce, as it invests in technologies that improve workflow.
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“We’ve embarked on a multi-year initiative to deliver $2 billion in cost savings by reducing expenses and investing in technologies to enhance how we work,” said a CVS spokesperson in a statement to TheStreet.
Corporate roles will be primarily impacted by this decision, but the it will not impact front-line jobs at the company’s “stores, pharmacies and distribution centers,” the spokesperson said.
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“Our industry faces continued disruption, regulatory pressures, and evolving consumer needs and expectations, so it is critical that we remain competitive and operate at peak performance,” the spokesperson said.
In CVS’s 2023 annual report, the company revealed that it is making “concerted investments” in technological capabilities such as “voice, artificial intelligence, and robotics” to help reduce cost, so the company’s latest cost-cutting appears to align with those goals.
CVS faces a decline in profits
The move from CVS also comes after it revealed in its second-quarter earnings report for 2024 that its operating income shrunk by almost 6% year-over-year, while total revenues in its Health Services segment decreased by about 9%.
Also, the company’s diluted earnings per share was $1.41, which is a decrease from the $1.48 it reported during the same quarter last year.
CVS’s Health Care Benefits segment, which offers medical, pharmacy, dental and behavioral health products and services, also suffered a roughly 39% decrease in adjusted operating income. The company claimed in the report that this was mostly due to it facing a recent decline in its Medicare Advantage star ratings.
CVS's board of directors consider a breakup of the company
Amid multiple headwinds in its business, CVS’s board of directors is reportedly conducting a strategic review of the company, which has been ongoing over the past few weeks, according to a new report from the Wall Street Journal.
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Board members are even reportedly weighing the possibility of separating CVS’s retail and Aetna health insurance operations.
CVS completed its acquisition of Aetna in 2018 for about $70 billion with the goal of “helping people achieve better health at lower cost.” The merger was also expected to enhance revenues and “generate significant value for shareholders.”
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