Beauty and wellness could have more room to shine at CVS as the drugstore giant prepares to untangle its retail pharmacy and health care businesses.
CVS Health revealed plans to separate into two independent, publicly traded companies. CVS Pharmacy will comprise about 9,000 retail pharmacies, mail pharmacy, MinuteClinic and the Health100 technology service business. Prem Shah, currently group president of CVS Health, will become CEO of CVS Pharmacy upon separation.
Aetna, CVS Caremark, CVS Specialty, Oak Street Health and Signify Health will make up the health care solutions company, which will continue to be called CVS Health in the interim. The planned separation is expected to be completed in the first half of 2028, subject to customary conditions and approvals.
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The move marks a significant reversal of CVS’s strategy over the past two decades to build an integrated retail pharmacy and health care business.
Wendy Liebmann, CEO of WSL Strategic Retail, believes the separation could help CVS strengthen front-end sales, particularly in beauty and wellness. “They can finally focus on retail, and health and beauty are core category pillars,” Liebmann said.
Rohit Banota, founder of Jump Accelerator, sees a natural fit between beauty, wellness, longevity and health and CVS’s core health care mission. “Splitting the company allows for better targeting and positioning to increase margins and loyalty. A brand-driven, high-margin business like beauty needs true shopper intimacy for premium growth against consolidation, which is merely an operational strategy focused on efficiency and cost savings,” he said.
Banota believes CVS can capitalize on its position in beauty and wellness by elevating the front-of-store experience, emphasizing discovery and exclusivity and investing in hyper-personalized technology and curation.
David Joyner, currently chairman and CEO of CVS Health, outlined the rationale for the move, including the potential for improved agility.
“Each company will have greater flexibility to adopt the technologies that best fit its needs, improve efficiency and more effectively adapt to the regulatory and other dynamics,” he said during the third-quarter earnings call. “Retail, for the most part, has been operated behind the firewall. The timing of this decision is saying now is the time because we are not doing anything out of a distressed decision. We are doing it because we have healthy balance sheets with momentum in each one of the businesses we’re operating.”
Industry expert Jeffrey Ten believes the separation could elevate the importance of beauty and wellness within CVS Pharmacy. He noted that while the split won’t immediately alter store shelves, a stand-alone retail business will rely more heavily on front-of-store margin drivers.
“What I’m watching is whether beauty gets treated as a growth engine that earns capital or as a margin backstop for a pharmacy business under pressure. I’d expect more pressure on productivity per square foot, assortment rationalization and private label. That could be good for brands that deliver turns and traffic, and harder on those that don’t,” Ten said.
Under the direction of Michelle LeBlanc, vice president of merchandising for beauty, personal care and the Hispanic Strategy Team, CVS has been listening to consumers and adapting to how they shop.
Recent store changes include moving skin care to the forefront, curating assortments to simplify shopping and localizing product selection. Inspired by research showing the strength of drugstores in attracting male shoppers, CVS moved all men’s brands together, resulting in triple-digit growth for the brands, according to LeBlanc. CVS has also increased investment in education for its beauty advisers, who now work in about 700 stores.
Products that support patients taking GLP-1 medications represent another opportunity for CVS. According to the retailer, consumers taking these drugs over-index in health and beauty products, potentially creating opportunities to connect shoppers with complementary products and services beyond the prescription including hydration and skin care products.
