CVS Launches Layoffs, Reportedly Reviewing Strategic Options
The leaders of CVS Health Corp. are cutting nearly 3,000 jobs as part of a broader $2 billion cost-cutting plan announced this summer and are also said to be reviewing the company’s strategic options as an activist investor pushes for change.
In communicating the job cuts to employees, Forbes reported Oct. 1, executives said the move is necessary so that CVS can “remain competitive and operate at peak performance.” The 2,900 positions set to be cut amount to less than 1 percent of CVS’ total workforce and will affect mostly corporate jobs. What leaders called “front-line jobs” in CVS stores, pharmacies and distribution centers will not be affected.
Word of the planned layoffs comes shortly after several other media outlets reported that other major changes could be on the horizon for CVS:
The Wall Street Journal said Glenview Capital Management—an investment firm that has in the past clashed with several other healthcare companies’ management teams, including Community Health Systems and Tenet Healthcare Corp.—has been prodding President and CEO Karen Lynch and her team to improve operations after two consecutive quarters of needing to lower their profit guidance.
And Reuters reported that CVS leaders are exploring their strategic options, a decision that often results in break-ups, divestitures or other notable events. (In a statement, Glenview officials said they are not pushing for a break-up.) Reuters noted that CVS’ Aetna insurance unit and its national pharmacy/retail store network could be separated and that it’s not yet clear where the company’s massive Caremark pharmacy benefit management operation would then be housed.
A CVS spokesperson told Reuters the company’s executives and directors “are continually exploring ways to create shareholder value” but declined to comment on whether it is considering some form of split.
Investors don’t appear to like the sound of the latest developments: Shares of CVS (Ticker: CVS) were down nearly 3 percent to about $61.10 on the afternoon of Oct. 1. Over the past six months, they have lost more than 20 percent of their value, a move that has trimmed CVS’ market capitalization to about $77 billion.
