CVS HealthCVS

and WalgreensWBA

have all the remedies for your ailments but are struggling to cure their own fiscal fevers. Since the pandemic hit, America’s two largest pharmacy chains have been squeezed — and unfortunately for the rest of America, their sickness is contagious.

Wal-reds and CVStress: Brick-and-mortar drug stores are facing competitive and operational pressures weighing on profits and hampering their growth. Between labor and store upkeep costs, multi-billion dollar opioid lawsuit settlements, and online competition, the two firms have had significant financial losses in recent quarters. And analysts are worried it could get worse.

• In May, CVS — America’s largest pharmacy chain — had its worst day in 15 years, slashing its earnings guidance for the second time in 2024 after paltry earnings.
• Walgreens, despite generating $180B in revenue over the past five quarters, reported staggering net losses of $5.6B and neglected to issue new guidance.

Pharmacy Prognosis

Walgreens’ stock has plummeted 57% year-to-date, ranking as the worst-performing stock in the S&P 500 — while competitor CVS Health has dropped 28%. In response, both companies are embracing dramatic cost-cutting measures.

• Earlier this year, CVS announced plans to close 10% of its stores (~900 locations) as part of a $1B restructuring effort to expand its health hubs business.
• Similarly, Walgreens intends to shutter 25% of its stores (~2.15K locations) that are unprofitable, too near in proximity, or are struggling with theft.

Forward-looking: After years of consolidation, supply chain woes, and shrinking margins, pharmacies may be facing a catastrophe that they played a pivotal role in creating. WBUR warns that a pharmacy crisis could jeopardize drug access for millions of Americans — but if not CVS or Walgreens, who will fill America’s prescriptions? We’ll have to see.