Dive Brief:

• CVS Health Inc. will eliminate 600 jobs at its corporate offices in Rhode Island, Illinois and Arizona over the next two months, but it's not clear which divisions will see cuts, The Wall Street Journal reports.

• Affected employees will be able to apply to other positions within the company, and those who don't find new roles in the company will receive severance packages, according to the report.

• “We have determined that changing market dynamics and the increasingly competitive environment require us to operate as a more lean and efficient organization,” CVS Health said in a statement.

Dive Insight:

CVS Health employs more than 240,000 people in the U.S., many of whom work in retail positions or as pharmacists at its 9,600 pharmacies. But with increased competition in the drugstore retail space, CVS Health is starting to let some of those positions go.

Recently, the retailer has been buffeted by the likes of Walgreens, Rite Aid and Wal-Mart Stores jockeying for sales of medications and healthcare services. Today’s drugstores compete with doctors and healthcare clinics as well as with retailers like Sephora and Ulta in beauty, and of course, general merchandisers like Target (and, increasingly, Amazon) in consumer goods. The retailer may also be wary of the proposed merger between rivals Walgreens and Rite Aid. 

An uptick in lower-priced generic pharmacy sales and a decline in store traffic muted CVS Health in its previous quarter. Sales grew 2.1% in Q2, missing analyst expectations for a 2.5% rise and trailing well behind the 4.2% increase that CVS posted in the first quarter of this year. Non-pharmacy same-store sales fell 2.5% in Q2, the company added. The drugstore retailer is due to release its third quarter results next week. 

While the Affordable Care Act has expanded some opportunities for drugstore retailers to offer more medical services, the law has also helped lower some healthcare costs, as it was intended to do, which could hit retail sales. CVS also left a lot of money on the table when it ceased sales of tobacco products two years ago.

On the plus side, the retailer took over Target’s entire pharmacy business last year, and that seemed to give CVS an easy way to expand its store base and clinic operations. However, many Target pharmacy customers are irritated that CVS did away with Target’s innovative medication labeling system. CVS now owns the system, which helps curtail medication errors and makes the bottles and labels easier to read and use, but it has said that it doesn't want different labeling systems at different stores, and defaulted to its previous method. Bringing the so-called ClearRx to all stores could perhaps differentiate its pharmacy operations for customers.