Mad Money

CVS CEO Larry Merlo says 600 remodeled HealthHUBs will be opened by the end of 2020

Key Points
  • "We're really excited about what we're seeing from the consumers. The acceptance, the interest that is growing with our clients," CVS Health CEO Larry Merlo told CNBC about the company's new HealthHUB concept.
  • "We've made a commitment to have about 600 hubs by the end of this year. That's 12 [updated stores] a week with a trajectory of 1,500 hubs by the end of 2021," he said in a "Mad Money" interview.
  • "We're seeing increased traffic in the stores, we're seeing higher front-store margins and we are seeing terrific utilization of the health-related services," he said.
VIDEO1:4101:41
CVS Health CEO Larry Merlo gives an update on the HealthHUB roll out

CVS Health CEO Larry Merlo told CNBC Monday that the health retailer is on track to meet its goal of rehabbing more than one thousand of its stores and said the chain is seeing positive early results.

CVS launched three of its HealthHUB concept stores in the Houston, Texas region near the end of 2018 and expanded the program to 50 locations in four markets by the end of 2019, he said. Hundreds more are scheduled to be overhauled by the end of 2020.

"We're really excited about what we're seeing from the consumers. The acceptance, the interest that is growing with our clients," Merlo said in a sit-down interview with Jim Cramer on "Mad Money." "We've made a commitment to have about 600 hubs by the end of this year. That's 12 [updated stores] a week with a trajectory of 1,500 hubs by the end of 2021."

CVS has more than 9,900 locations situated in 49 U.S. states, Washington, D.C. and Puerto Rico.

Boston, Dallas-Fort Worth, North Carolina and Ohio are among the next markets that CVS is targeting for its HealthHUB expansion this year. With its HealthHUBs, CVS wants to offer more health services and products to customers, which is tailored around the company's $70 billion acquisition of Aetna. Florida, Maryland and Virginia are also on the list to carry the new concept in the first half of 2020.

Merlo said the idea is to make CVS a "health-care destination."

CVS is redesigning about 20% of the real estate in its front stores to carry more health-related services, including walk-in clinics, care concierges and other pharmaceutical missions. The renovations coincide with rival Walgreens' plans to rehabilitate its stores in an attempt to drive more foot traffic.

While Merlo welcomes the early results that he has seen in the stores, he said it is too early to say how effective they will be due to a small sample.

"We're seeing increased traffic in the stores, we're seeing higher front-store margins and we are seeing terrific utilization of the health-related services," he said. "So we're really pleased with what we're seeing."

CVS shares posted a 13% gain in 2019. The stock is down about 2% thus far in 2020, closing Monday's session at $72.76 per share.

VIDEO8:3208:32
CVS CEO Larry Merlo talks lower consumer costs, HealthHUB roll out

Disclosure: Cramer's charitable trust owns shares of CVS.

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