Target to rebrand its pharmacies as CVS

DALLAS — The results of Target’s biggest decisions last year are about to show up in Dallas-Fort Worth: Soon there will be a CVS pharmacy inside your Target store.Target sold its pharmacy business to CVS for $1.9 billion instead of trying to expand the complex business on its own.The rebranding of 42 Dallas-area Target store pharmacies will begin later this month. CVS is already the largest pharmacy chain in North Texas. Last year, its 207 area stores had a 32 percent market share, according to Chain Drug Review, followed by Walgreens (26 percent) and Wal-Mart (16 percent).CVS expects to be finished with local store conversions, which will happen overnight, by May.Target was a small player in the pharmacy business. It would have needed to make a huge investment in services and systems to catch up with the networks of the largest drugstore chains. CVS has developed programs and systems and has more than 80 million customers.“We weren’t a scale player,” Target CEO Brian Cornell said when he was in Dallas for a conference late last month. “Now we have the best of both worlds. We still get the traffic from the pharmacy, but we can focus on what we’re known for.”Pharmacy was a break-even business, and now it’s a contributor to earnings, Cornell said. “We’ve looked at all the elements of our business. Everything has been on the table.”Since August 2014, when Cornell joined Target as CEO — the first to come from outside the company — Target has made other big decisions. It exited Canada, where it lost $2 billion after opening stores there in 2011. Cornell made reducing the volume of out-of-stock merchandise a priority and refocused its online business with plans to spend more on supply network and technology. Target just hired Arthur Valdez, a 16-year veteran of Amazon.com, to be executive vice president, chief supply chain and logistics officer.Cornell turned Target’s attention back to key merchandise categories: fashion, baby, home furnishings and wellness products. Vignettes have been added in the home department and mannequins in apparel. Target is trying to recapture that cheap-chic fashion authority that it lost in recent years as fast-fashion apparel chains like H&M and Forever 21 opened stores across the U.S. It experienced a setback in the eyes of customers after a major credit card breach in 2013, before Cornell arrived.He sees grocery as another big opportunity. One of three U.S. distribution centers that Target operates solely for groceries is in Denton. About $20 billion of Target’s $74 billion in sales were from its grocery aisles.“We know there’s growth in the category for us,” Cornell said. Target continues to work on food assortments, adding relevant items like organic and gluten-free, he said, “We’re not shouting about it. There won’t be a big reveal.”Adding just one item into each basket of existing grocery customers would add billions of dollars in incremental sales. One of the most visible changes in food is in presentation. Target is trying to grab more attention for its $1 billion-a-year Market Pantry private-label groceries with new packaging.Target announced this month it will open a dozen small stores this year and more in 2017. They range from 16,000 to 33,000 square feet vs. 125,000 square feet for its regular stores. They’re being put in densely populated cities like Chicago, where Target just announced its third small store.College campuses are a big opportunity, Cornell said, and he hinted there may be smaller stores coming soon to Texas, a state he knows well. Before joining Target, he was CEO of PepsiCo Americas Foods, which includes Plano-based Frito-Lay. Before joining PepsiCo, he was CEO of Sam’s Club and CEO of Irving-based arts and crafts chain Michael’s Stores. Earlier, he was chief marketing officer of Safeway, which owned Tom Thumb in Dallas.The rebranding inside Targets started in February in North Carolina, and CVS said it expects to be finished with 1,672 Target pharmacies nationwide by early July.As a result, CVS’ footprint will increase by about 20 percent. Target puts CVS in some major new markets, including Seattle, Denver, Portland and Salt Lake City.

Target to rebrand its pharmacies as CVS