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02/21/2019

CVS is feeling the pressure

Rising costs due to several acquisitions are dragging down the financials at CVS.

The drug store chain reported a less than stellar earnings report for its fourth quarter ended Dec. 31.

The company reported a net loss of $421 million, or 37 cents per share, down from a profit of $3.29 billion, or $3.22 per share, a year earlier. This included a $2.22 billion goodwill impairment charge (a loss of $1.99 per share) related to CVS' long-term care business.

However, same-store sales increased 5.7 percent from the year-ago quarter, when they grew just 0.1 percent. Pharmacy drove the overall gain, with same-store sales up 7.4 percent against weak sales growth a year ago. Front-store sales, which include items like toilet paper and shampoo, grew 0.5 percent.

According to Barron’s news, during the company’s conference call, management said that this year would be a “bridge to the future” and that its integration of Aetna was on track to meet its $750 million synergy target, with as much as $350 million of that total occurring in 2019.

However, the company also admitted it sees ongoing pharmacy reimbursement and pricing pressures as its biggest headwind, although it’s looking to offset that with initiatives like beefing up its health and beauty product lines.

CVS has a growing mix of more than 15 store brands, which account for 20 percent of its product assortment and are outperforming some big-name brands, according to the company.