CVS beats Q1 expectations on strong pharmacy demand

Dive Brief:

CVS Health surpassed expectations for first quarter revenues but missed expectations for its second quarter adjusted earnings forecast.
CVS earned $1.18 per share, beating the analyst average from Thomson Reuters for $1.16 per share. Net revenue increased 19% to $43.22 billion, edging past analysts' estimates of $43 billion.
CVS's Q1 same-store sales rose 4.2%, including a front-of-store sales increase of 0.7%. Front-of-store sales had been falling for years, exacerbated by the retailer’s 2014 move to end tobacco sales.

Dive Insight:

CVS Health last year acquired prescription drug fulfillment company Omnicare for $10.4 billion. Omnicare fills many rare and expensive medications that are shipped directly to patients and provides pharmaceutical services to nursing homes and other long-term care facilities. That investment continues to pay off, helping CVS eclipse Wall Street expectations in the first quarter: Its specialty pharmacy and pharmacy benefit management business increased 20.5% to $28.8 billion.

CVS is also benefitting from its efforts to become an all-around health and beauty retailer. Its decision to drop lucrative tobacco sales has been a significant if expensive part of that transformation, and could help position CVS favorably against rival Walgreens, which is preparing to acquire Rite Aid.

CVS recently launched its Hispanic-focused “CVS y más” initiative in nine Los Angeles-area stores. The “CVS y más” format, first launched last year in 12 Miami CVS locations, includes bilingual signage and staff, more than 1,500 products favored by Hispanics in California, more competitive pricing on hundreds of products, and new non-pharmacy services like bill payments, domestic and international wireless recharge and money transfers.

In addition, CVS last month added curbside pickup services, and President/CEO Larry Merlo noted in a statement that such omnichannel moves are key to attracting and maintaining customers, who are increasingly also “patients.”

“Our contract wins have grown for the 2016 PBM selling season and our 2017 season is off to a solid start with some early wins,” Merlo said in a statement. “Our distinctive, channel-agnostic solutions are resonating strongly in the market as they continue to control patient and client costs while improving health outcomes. We continue to believe we have the right strategy for success in the evolving healthcare marketplace."