CVS shuts Beauty360 retail stores

Loyalty programs and in-house brands provide the drugstore with much higher profit margins than other products.

By Trefis Mar 26, 2012 12:28PM
Image: Lipstick (© Stockbyte/PictureQuest)CVS Caremark (CVS) will close the shutters on its high-end beauty retail stores Beauty360 and the corresponding e-commerce business to focus on the growth of its core CVS pharmacy beauty business. 

The move is motivated by the success of its Beauty Club loyalty program and the performance of its in-house brand Nuance Salma Hayek launched last year. It intends to focus its efforts in the beauty retail sector through its 7,300 strong CVS drugstore network.

CVS Caremark is an integrated pharmacy services provider and drugstore chain that competes with Walgreen (WAG), Wal-Mart (WMT) and Rite-Aid (RAD) in its prescription drugs, over-the-counter drugs and general merchandise segments. It also competes with Medco Health Solutions (MHS) and Express Scripts (ESRX) in the pharmacy benefits management segment.

CVS Caremark Stock Break-Up
Beauty360, CVS's prestige beauty retail stores

CVS launched Beauty360 retail stores in November 2008, located adjacent to select CVS drugstores to provide convenient access to prestige and niche beauty care brands. The stores were staffed with trained and licensed professionals. In January 2010, it also introduced e-commerce capabilities for Beauty360 through a shared basket across and, in order to provide its 6 million visitors access to luxury beauty products.

Launch of ExtraCare Beauty Club and in-house brand Nuance Salma Hayek

In January 2011, CVS launched BeautyClub loyalty program as an extension to its existing ExtraCare loyalty program. It is the first beauty loyalty program introduced at a mass retailer that has crossed 10 million members within a year. ExtraCare is the U.S.'s largest retail rewards program with more than 67 million members, estimated to have provided its cardholders savings and rewards in excess of $3 billion in 2010.

With the launch of Beauty Club, CVS also introduced its in-house beauty brand, Nuance Salma Hayek, developed in partnership with actress Salma Hayek. The brand has become quite popular and has exceeded sales expectations. In-house brands such as these also provide retailers like CVS much higher profit margins than other branded products.

Motivated by the success of its Beauty Club loyalty program and in-house brands, CVS is now closing down Beauty360 stores and its e-commerce business to focus on the growth of its core CVS pharmacy beauty business.

CVS Caremark Avg Front-end Revenue per Square Foot

We have a $45 price estimate for CVS Caremark, almost in-line with the current market price.



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