CVS names new CEO in the wake of layoffs and poor stock performance

(CNN) — America’s largest drug store chain named a new chief executive officer on Friday, with longtime CVS Health executive David Joyner replacing Karen Lynch.

CVS also withdrew its 2024 profit forecast and advised investors against relying on the full-year guidance provided in August, citing higher medical cost pressures. Stock prices have dropped nearly 20% this year and fell sharply following the announcement.

The shakeup comes after a particularly challenging year for the company, marked by plummeting shares, sluggish growth and pressure from investors, among a litany of other woes.

In August, rising costs at CVS’ insurance arm Aetna cut into profits, leading to the ousting of then-president Brian Kane. In September, the Federal Trade Commission took aim at big pharmacy benefits managers, including CVS subsidiary Caremark, accusing them of inflating insulin prices.

“We are not surprised by the management change given the execution shortfalls at CVS, especially at the Aetna medical insurer that Lynch previously led,” Julie Utterback, senior equity analyst at Morningstar, said in a note. “However, investors may have been hoping for new blood from outside the organization.”

Lower reimbursement rates for prescription drugs have hit retail pharmacies, including Walgreens and Rite-Aid, resulting in flagging profits and forcing drug stores to shutter locations and cut jobs.

Earlier this month, CVS said it would lay off 2,900 workers as part of a cost-cutting effort. It closed 244 stores in a four-year period and in 2021 announced plans to close an additional 900 stores. Meanwhile, rival chain Walgreens is closing 1,200 stores as it faces competition from online pharmacies and larger retailers — another challenge facing drug stores.

CVS was also surrounded by talk of a potential breakup of its retail pharmacy arm from its insurance arm following pressure from activist investors in early October. But as the company appeared to double down on the value of its integrated model in its announcement, analysts say that is unlikely.

“We believe our integrated model works. Our results need to show that more consistently,” a CVS Health spokesperson told CNN in a statement.

Joyner, previously president of CVS Caremark, succeeds Lynch after the latter stepped down in agreement with the company’s board of directors.

Lynch had served as CEO since 2021 and led the company through the Covid-19 pandemic, overseeing the rollout of in-store vaccinations. Under her tenure, the company also acquired Signify Health, which offers at-home healthcare services.

“The Board believes this is the right time to make a change, and we are confident that David is the right person to lead our company,” Executive Chairman Roger Farah said in a statement.

CVS is scheduled to report third-quarter earnings on November 6.

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