CVS Profit Declines in First Quarter of 'Rebuilding Year'

By Anne Steele Features Dow Jones Newswires

CVS Health Corp. reported lower profit in the first quarter of what its chief executive has called a "rebuilding year," as fewer customers visited its stores and it was pressured by more generic drugs.

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The pharmacy operator also said profit for its current quarter could land on the low end of Wall Street's expectations, coming in at $1.29 to $1.33 a share excluding certain items. Analysts are expecting $1.33.

Chief Executive Larry Merlo said he expects 2017 to be a rebuilding year and that while the company is pleased with its performance, "we won't be satisfied until the company returns to sustainable, healthy earnings growth."

Sales in the pharmacy services segment strengthened, increasing 8.5% to $31.2 billion, in part driven by an 11% jump in pharmacy network claims. Brand inflation and growth in specialty pharmacy also helped, partly offset by more generics, leading to lower prices.

Sales in CVS's retail segment, meanwhile, slipped 3.8% to $19.3 billion, dragged by a decline in same-store sales, as well as pressure from reimbursements and generics.

Softer traffic and changes to promotions contributed to a 4.9% decline in same-store sales at the front of the store, where CVS sells everyday nonpharmacy items. Pharmacy same-store sales fell 4.7%, hurt by recent generic drug introductions.

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CVS said the generic dispensing rate increased 140 basis points to 87% in the pharmacy services segment and rose 180 basis points to 87.5% in the retail segment, compared with a year ago.

Over all CVS reported a profit of $952 million, or 92 cents a share, down from $1.15 billion, or $1.04, a year earlier. Excluding items such as acquisition-related costs, earnings fell a penny to $1.17 a share. The company had forecast $1.07 to $1.13 a share.

Revenue rose 3% to $44.5 billion, above expectations for $44.2 billion, according to analysts polled by Thomson Reuters.

The company backed its 2017 guidance.

Write to Anne Steele at Anne.Steele@wsj.com

(END) Dow Jones Newswires

May 02, 2017 08:17 ET (12:17 GMT)