NEW ORLEANS – The two largest retail pharmacy chains operating in the U.S. are CVS Health and Walgreens Boots Alliance. Both companies have invested heavily in brick-and-mortar stores. Around 85% of the U.S. population lives within 10 miles of one of CVS Pharmacy’s 9,000+ locations, whereas Walgreens, with approximately 8,500–9,000 stores, is accessible within five miles for about 78% of Americans.
Despite similarities in their reach, the two companies are taking different approaches when it comes to remaining viable in the evolving retail pharmacy market.
Walgreens Boots Alliance (WBA) is set to end nearly 100 years as a publicly traded company after agreeing to be acquired by Sycamore Partners, a private equity firm based in New York with a track record for acquiring distressed businesses for profit.
WBA’s market value has shrunk to just more than $9 billion from nearly $100 billion a decade ago and its debt and lease obligations have increased to almost $30 billion. In Oct. 2024, WBA announced plans to close roughly 1,200 underperforming stores over the next three years in an effort to streamline its operations and improve overall efficiency.
The transaction, valued at approximately $10 billion, is expected to close in the fourth quarter of 2025 subject to regulatory approvals and closing conditions.
Once complete, Sycamore will pay $11.45 per share in cash and shareholders may receive up to an extra $3.00 per share if WBA’s primary care businesses, VillageMD, Summit Health, and CityMD, generate future revenue.
The acquisition carries implications for WBA’s bondholders, too. The structure of the deal could potentially lead to a downgrade in the company’s credit rating. Should this occur, WBA might be required to repurchase bonds at par value, a scenario that could benefit current bondholders.
CVS Health, another major player in the U.S. pharmacy sector, is navigating its own set of challenges and strategic adjustments. In the fourth quarter of 2024, CVS reported total revenues of $97.7 billion, marking a 4% increase from the previous year. However, the company’s profitability metrics presented a more complex picture. Its GAAP (Generally Accepted Accounting Principles) diluted earnings per share (EPS) fell to $1.30 from $1.58, while adjusted EPS dropped to $1.19 from $2.12 year-over-year.
CVS has also been actively restructuring its business to respond to evolving consumer behaviors and competitive pressures. Starting in 2022, the company announced plans to close 900 stores over a three-year period. At the same time, CVS is experimenting with smaller store formats that primarily focus on pharmacy services.
Despite its ambitious restructuring efforts, CVS has faced operational challenges. Reports of extended wait times for prescriptions, for example, have caused customer dissatisfaction. Acknowledging these issues, CVS has pledged to investigate and address customer service concerns while continuing to invest in technology and process improvements.
In comparing the two pharmacy retail giants, both CVS Health and Walgreens Boots Alliance are confronting industry-wide challenges such as inflation, intense competition, and fluctuating reimbursement pressures from insurers and government programs (like Medicare or Medicaid) for the services and prescriptions they provide. These factors have driven both companies to reassess their operational strategies, optimize store footprints, and invest in new business models to remain competitive.
While CVS is focusing on cost reductions, job cuts, and the introduction of innovative store formats, Walgreens is transitioning to private ownership under the Sycamore Partners deal. This strategic shift is expected to provide Walgreens with greater flexibility to restructure its assets and potentially offload underperforming segments, such as its international pharmacy chain, Boots.
CVS, which serves approximately 185 million Americans, is banking on its strategic initiatives. It is using biosimilar conversions which means it is switching from original, often more expensive, biologic drugs to similar, more cost-effective versions called a biosimilars. And it is introducing new pricing models to maintain try to maintain market dominance.
In contrast, Walgreens’ move to privatize is intended to allow for a more focused restructuring that could better position the company for long-term growth.
