As retailers across the U.S. continue their struggle to find enough employees, CVS Health is raising its hourly minimum wage and removing education requirements for recruitment of employees, a move that executives hope allows the company to bolster its ranks and continue growth.
Incremental increases to hourly rates will start this month, the company said, with all employees making at least $15 per hour by July 2022. CVS said approximately 65 percent of hourly employees already make more than $15 an hour; the pharmacy chain has raised its minimum hourly wage by more than 60 percent over the last four years.
The Rhode Island-based retailer and health benefits provider also recently eliminated the high school diploma or GED requirement for most of its entry-level roles, and this year it intends to eliminate its GPA requirement for university recruitment.
Karen Lynch, president and CEO of CVS Health, said the company has already seen impacts from the labor shortage in its stores, which is why it decided to make this “targeted investment” in pharmacy technicians and retail associates.
“Obviously it’s a tight labor market, and we’re paying attention,” Lynch told analysts and investors on CVS’s quarterly earnings call. “We’ve got a lot of hiring to do to support growth, and we see pressure, but we’ve been managing through it.”
The increased wages are expected to cost CVS an additional $600 million over the next three years, with $125 million coming in the final four months of this year. CVS joins Walmart, Bed Bath & Beyond and several other major retailers in expanding employee pay and benefits in an effort to attract workers.
In the second quarter, CVS saw $72.6 billion in revenue, up 11 percent compared to the same period in 2020 based on an 11 percent revenue increase in the company’s healthcare benefits segment, a nearly 10 percent increase in the pharmacy service segment and 14 percent increase in the retail segment. Nearly two-thirds of the increased retail sales were from health and wellness products.
In the second quarter, CVS administered 6 million COVID-19 tests and nearly 17 million vaccines across the U.S., bringing the overall total to 29 million tests and 30 million vaccinations since the program started.
However, Lynch noted that vaccinations peaked in April before slowing in May and June despite the impact of new variants.
Still, CVS’s COVID-19 efforts have been a boost to its bottom line (in addition to helping stem the tide of the pandemic). Approximately 12 percent of people tested for COVID-19 at a CVS location choose to fill a new prescription or get their COVID-19 vaccine with CVS Health.
Additionally, CVS Health Chief Financial Officer Shawn Guertin, who took on his role at the end of May, noted that approximately one-third of the retail segment’s growth was attributable to COVID-19 tests and vaccines.
Guertin said he anticipates the factors that drove second-quarter performance to continue throughout the second half of 2021, though year-over-year growth in retail is expected to slow amid lower vaccination rates. CVS raised its full-year revenue guidance to between $281 billion and $285 billion, which would be between 4.5 percent and 6.25 percent year-over-year growth.
Guertin noted, though, that the company has reduced its forecast for vaccinations this year and incorporated a higher estimate of COVID-related costs for the second half of the year.
“We believe that our forecast is appropriately positioned, given that there remains a high degree of uncertainty in terms of out COVID will play our during the second half of the year,” Guertin said.
Looking to 2022, CVS is getting ready in January to launch new co-branded offerings with Aetna, which it acquired in 2017. The new offering, which will be available in eight states, combines health insurance, pharmacy and behavioral health services with CVS’s retail presence. “This is something that no one else can deliver,” Lynch said.