CVS Appoints New CEO Following Layoffs and Declining Stock Performance

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The largest drug store chain in America chose a new CEO on Friday, with CVS Health veteran David Joyner taking over from Karen Lynch.

CVS also pulled its 2024 profit outlook and urged investors not to rely on the full-year guidance it issued in August on grounds of increased medical cost inflation. Many companies’ stock prices are down by nearly 20% year to date, and most of them declined after the announcement.

The cull occurs at a time the firm has witnessed a tough year as its share prices nosedived, growth slowed down and it tussled with investors among other issues.

In August, due to the increased costs at CVS health insurance segment, Aetna, former president Brian Kane was fired.

In September, the Federal Trade Commission went after large pharmacy benefits managers such as Caremark, which is a CVS company, saying that they were overcharging for insulin.

“We are not surprised by the management change given the execution shortfalls at CVS, especially at the Aetna medical insurer that Lynch previously led,” Julie Utterback, senior equity analyst at Morningstar, said in a note.

“However, investors may have been hoping for new blood from outside the organization” Public reimbursement rates have reduced the amount retailers such as Walgreens and Rite-Aid can make on prescription drugs thus lower profits and closures with resultant employment cuts.

Last week CVS announced that it plans to eliminate 2,900 employees due to restructuring efforts set in an early this month. Between 2015 and the end of 2019, it shut 244 stores and in 2021, said that it would shut another 900 stores.

However, rival chain Walgreens is planning to shut 1,200 stores as it is struggling with competition from other online pharmacies and larger retail stores — one of the issues that plague the drug stores.

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CVS was also dealing with speculation of the division of its retail pharmacy business from its insurance business after activist investors’ pressure in early October.

As some celebrated that the firm did double down on the value of an integrated model in its announcement, analysts say it won’t happen.

Joyner has been appointed to the position after the former was replaced by the company’s board of directors with Lynch. Lynch has been in the position of CEO since 2021 and was in charge of the company when in-store vaccination embarked on during the Covid-19 pandemic.

During her leadership, the company also bought Signify Health, an at-home health care provider. “The Board believes this is the right time to make a change, and we are confident that David is the right person to lead our company,” said the executive chairman Roger Farah.

The next CVS’ earning release is expected on November 6 in relation to the Q3 financial year.

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