Dive Brief:

• CVS Health on Friday said that Executive Vice President Karen Lynch, who is also president of its Aetna health insurance unit, will take over from Larry Merlo as president and CEO on Feb. 1. Merlo, who began his career at CVS four decades ago as a pharmacist, has led the company for the past 10 years.

• Lynch, who joined Aetna in 2012 before the CVS acquisition, has been instrumental in expanding the company's health care-focused strategy, according to a company press release. She previously had top executive positions at Magellan Health Services and Cigna.

• The news comes amid further evidence of the success of the medical emphasis at CVS, as third quarter revenue rose 3.5% to $67.1 billion and net income fell 20% to $1.2 billion. On the retail side, revenues rose 5.9%, with front store revenues up 2.7%.

Dive Insight:

The choice of Karen Lynch to lead CVS Health underscores how important the company's health care focus is to its strategy. CVS has made great strides in executing it, taking major steps like buying an insurance company for $69 billion two years ago and sacrificing revenue by taking tobacco products off its shelves before that.

The focus has been laser-like, perhaps to the detriment of its retail side. The second quarter saw a 4.6% dip in front-of-store sales, so the drugstore retailer has rebounded. While foot traffic has been just below 2019 levels in the past couple of months, visits were 1.2% higher than that during the week of Oct. 12, with momentum steady into the fall, according to data from Placer.ai.

The pandemic, while helping CVS as a retailer of essential goods, has curtailed traffic by drastically cutting down errand-running during workers' commutes, according to GlobalData Retail Managing Director Neil Saunders. The company's home delivery program, which keeps customers out of stores and away from additional purchases, and its lackluster wellness and beauty sales are also working against it when it comes to the store floor, according to GlobalData Retail research.

Prescription delivery is likely to continue to depress store traffic for all drugstore retailers even after the pandemic, Saunders notes. But a bigger problem is that it's not a shopping destination the way grocers and mass merchants are.

"CVS has a vision for its stores to become centers for health and wellness, which we believe remains valid as a strategy to give CVS more of a destination status," Saunders said in emailed comments. "However, the vision is still a long way from being reality. Making it so will shortly fall to new CEO Karen Lynch who will replace incumbent Larry Merlo in February of next year. Hopefully, a change in management will bring a change in thinking and allow CVS to meet its full potential in becoming an innovative player in the retail market."