CVS Store
A workers stocks the shelves in a CVS pharmacy store on February 07, 2024 in Miami, Florida. The company lowered its 2024 adjusted earnings forecast to at least $8.30 per share, down from a previous guidance of at least $8.50 per share. The company pointed to its medical cost trend analysis for the lower forecast. Joe Raedle/Getty Images

CVS Health announced on Tuesday it plans to lay off about 2,900 employees, which constitutes less than 1% of its total workforce, to cut costs.

The company says it has, "embarked on a multi-year initiative to deliver $2 billion in cost savings by reducing expenses and investing in technologies to enhance how we work."

The impacted positions were mostly corporate roles and the layoffs will not impact frontline workers in pharmacies, stores and distribution centers, CNN reported.

The job cuts are in addition to the approximately 5,000 layoffs in 2023. The company had prior plans to shut down around 900 stores between 2022 and 2024.

"Our industry faces continued disruption, regulatory pressures and evolving consumer needs and expectations," said a spokesperson.

An analyst who covers the health industry said that drugstore chains in the U.S. are facing woes due to declining reimbursement rates for prescription drugs.

Not only that, the front end of drug stores that sell snacks and a number of household items, no longer generate profitable income since many consumers tend to order their household staples from online stores or from big-box chains like Target and Walmart.

While CVS Health may have seen a decline in revenues, which may have necessitated the successive job cuts, it is making investments in artificial intelligence.

The company is also making investments in robotics. Based on its annual report, the company plans to use AI "to further automate, reduce cost and improve the experience for all of its constituents."

Earlier this week, reports emerged that an activist investor, Glenview Capital Management, is planning to push for changes in the management of CVS Health. The hedge fund issued a statement that is is not planning to break up CVS Health.

"Press reports have represented that Glenview is pushing for a break-up of CVS Health – this is false," Glenview Management stated.

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