DOW JONES NEWSWIRES
CVS Caremark Corp. (CVS) posted a 17% increase in fourth-quarter
net income as sales and margins rose and the nation's largest
drug-store chain saw retail profit climb.
Pharmacy operators have been cutting costs, including trimming
their work forces, as the weak economy has led consumers to fill
fewer prescriptions. CVS, which last month said the trend would
continue for most of the year, has been aggressively promoting
discount drug programs, as have several other drug chains, a move
that can increase sales among the uninsured but could also threaten
margins.
CVS last month warned investors that 2009 margins in the
CaremarkRX pharmacy-benefits business, acquired for $27 billion in
2007, would be tight after it lowered prices to keep clients.
CVS posted net income of $949.3 million, or 65 cents a share, up
from $811.2 million, or 55 cents a share a year earlier. Earnings
from continuing operations, excluding acquisition-related charges,
rose to 70 cents from 58 cents.
Revenue rose 10% to $24.14 billion.
Analysts polled by Thomson Reuters were expecting earnings of 69
cents a share on $23.29 billion in revenue.
Gross margin climbed to 21.6% from 20.3%.
Retail revenue increased 19% amid October's acquisition of Longs
Drug Stores as same-store sales rose 3.6% - 1.8% at the front end
and 4.5% at the pharmacy despite increased generic-drug usage
crimping the pharmacy figure by 2.6 percentage points. But those
higher-margin products helped push retail earnings up 35%.
Revenue in the pharmacy-services segment climbed 1.5%, though
adjusting for the impact of new generics, it would have grown 7.8%.
Processed claims rose 18% due to an acquisition and increased
enrollment in CVS' Medicare Part D business. The segment's profits
edged up 0.8%.
CVS has emerged as one of the largest survivors of a bruising,
multiyear consolidation of the U.S. pharmacy business. The Longs
takeover made CVS the nation's largest pharmacy chain by number of
stores and expanded its footprint into Western markets where it has
been weak.
CVS Caremark last month boosted its quarterly dividend 11%,
citing its continued strong financial performance and significant
cash generation, marking the sixth consecutive year of
increases.
Shares closed Wednesday at $26.99, and there was no premarket
activity.
-By Shirleen Dorman, Dow Jones Newswires; 201-938-2310;
shirleen.dorman@dowjones.com
