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Target selling pharmacy, clinic businesses to CVS Health

 
A Target sign on the front of a Target Store, in Wilsonville, Ore. [Associated Press (2011)]
A Target sign on the front of a Target Store, in Wilsonville, Ore. [Associated Press (2011)]
Published June 16, 2015

Target agreed Monday to sell its pharmacy and clinic businesses to CVS Health in the latest twist behind a push from big retailers to become all things to all customers.

The nation's second-largest drugstore chain will pay about $1.9 billion to run Target's in-store health operations and expand what they offer for customers who have come to expect that they will be able to fill a prescription when they shop at Target.

Drugstores, grocers and big retailers like Target and Walmart all have been pushing into each other's turf for several years now, blurring traditional retail boundaries, as they try to attract customers who want to make fewer stops when they go shopping.

The number of stores the average consumer visits during a typical month has dropped 15 percent over the past five years, according to market researcher NPD Group.

"In other words, they're not running from place to place to place like they used to," said Marshal Cohen, NPD's chief retail industry analyst. "It doesn't mean I am shopping less, it just means I am going to less stores."

In response, retailers have been adding clinics and pharmacies. Drugstores, in turn, have started stocking groceries.

All these businesses are chasing health care dollars as they watch baby boomers age and start using the health care system more, and as the number of insured people climbs because of the health care overhaul.

Target chairman and CEO Brian Cornell said CVS Health will bring more expertise and scale to its pharmacies and clinics than the retailer could offer on its own. He said research shows that its customers "absolutely expect" to have pharmacy services available at Target locations.

"They want to see the convenience of that inside our stores," Cornell said.

"I think this is creating an opportunity to define convenience in a way the customer wants to define it," CVS CEO Larry Merlo said.

Target, based in Minneapolis, has nearly 1,800 stores and also sells products through its Target.com website. The retailer, which caters to customers who have a little more money than Walmart shoppers, is trying to reinvent itself as a more nimble and innovative company under Cornell.

The deal announced Monday includes more than 1,660 pharmacies in Target stores that will be branded as CVS/pharmacy. The agreement also calls for new Target stores to include a CVS/pharmacy if they are going to offer pharmacy services.

Target Corp.'s nearly 80 clinic locations will be rebranded under the CVS Health MinuteClinic label.

CVS Health, based in Woonsocket, R.I., also will open up to 20 new clinics in Target stores within three years of the deal's closing. CVS Health operates about 7,800 drugstores.