DRUGSTORES

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When customers are coming to pharmacies for health care services rather than candy bars and greeting cards, CVS doesn’t have to rely as much on convenience and might not need as many stores, said Mickey Chadha, a Moody’s analyst who covers CVS.

Helping customers better manage chronic health issues and seek preventive care should also allow the company to better control health care costs, he said.

Walgreens has partnered with LabCorp to collect samples in stores from consumers for lab testing. Walgreens also recently announced that it’s expanding its work with health insurer Humana to open additional senior-focused health centers inside its stores.

Retail pharmacies such as Walgreens also are seeing an increasing number of Medicare patients, but pharmacies don’t tend to make a lot of money off reimbursements for medications from Medicare, said Soo Romanoff, a health care equity analyst at Morningstar.

The key for Walgreens is making sure the stores can offer more than prescriptions to that group, she said.

“The locations are great venues if you can offer a large number of services, especially to audiences that prefer these retail locations, which is kind of the older generation,” Romanoff said.

Meanwhile, competition from Amazon and other bricks-andmortar retailers has slowed sales of drugstores’ other merchandise, such as personal care products, household goods, and food and beverage items, analysts said.

Most people still buy those items in stores, but drugstores haven’t invested enough in the retail side of their businesses to keep up with what consumers want, said Neil Saunders, managing director of GlobalData Retail.

Prices for food and household items at drugstores tend to be well above what consumers would see at a grocery store or on Amazon. There are times consumers are willing to pay for convenience, but “they realize it’s more expensive,” Saunders said, “and they resent paying it.”

Even when it comes to products like cosmetics that have been drugstore staples, Walgreens, CVS and other chain stores are competing against retailers that specialize in selling those items, such as Ulta.

Both Walgreens and CVS are trying to do a better job catering to beauty shoppers. Last year, CVS redesigned the beauty department and began offering services like dry hairstyling and 30minute makeup refreshes in four stores, and Walgreens teamed with online beauty retailer Birchbox to open small shops within 11 stores. Walgreens also renovated the beauty departments in about 3,000 stores and trained 3,500 employees as beauty consultants.

At Walgreens, the partnership with Birchbox is part of a bigger push to strengthen its merchandise by teaming with other retailers.

It’s also partnered with Sprint to offer wireless services and advice on mobile services and products.

“Our stores have had a onesize-fits-all mindset since the Walgreens strategy was created in the U.S. in particular, so we are reformatting and reshaping our stores,” said Alex Gourlay, Walgreens’ co-chief operating officer, during an April earnings call.

It’s still early days for those partnerships, but they should help Walgreens in the long run, said John Boylan, a senior equity analyst with Edward Jones.

The 200 stores Walgreens is closing and plans by CVS to scale back store openings might sound dramatic, but both chains have thousands of locations.

Even if the role of the drugstore changes, it’s not about to disappear, Boylan said.

“There’s always a role for humans, and the relationship with the pharmacist is always important,” Boylan said. “Walgreens will change, but there are going to be a lot of things that do remain the same.”