CVS bulks up de­liv­ery ser­vice; tops 3Q earn­ings ex­pec­ta­tions

South Florida Times - - BUSINESS - By AP Health Writer Wall Street Jour nal

TOM MUR­PHY

CVS Health is crank­ing up pre­scrip­tion de­liv­er­ies to cus­tomer homes or work­places, as the drug­store chain tries to squeeze more of an edge from a mas­sive store net­work that puts 70 per­cent of the U.S. pop­u­la­tion within three miles of one of its lo­ca­tions.

The na­tion's sec­ond-largest drug­store chain will start off er­ing free, same-day de­liv­er­ies in De­cem­ber from its Man­hat­tan sites. It will also ex­pand next-day de­liv­er­ies na­tion­wide early next year while also bring­ing the same-day ser­vice to sev­eral more cities.

Drug­stores and other re­tail­ers have been push­ing more cus­tomer-friendly ser­vices in re­cent years in part to counter com­pet­i­tive pres­sure from Ama­zon. The on­line re­tail gi­ant al­ready of­fers to its Ama­zon Prime mem­bers in some cities same-day de­liv­er­ies of con­sumer goods typ­i­cally sold in drug­stores. That's a di­rect threat to the net­works of thou­sands of stores built by chains like CVS in or­der to get closer to the cus­tomer.

CVS Health Corp. plans to ex­pand same-day de­liv­er­ies to Mi­ami, Bos­ton, Philadel­phia, Wash­ing­ton, D.C., and San Fran­cisco by early next year.

A com­pany spokes­woman said the de­liv­ery ser­vice would be a faster al­ter­na­tive and have a wider reach than its mail-or­der busi­ness.

CVS Health runs more than 9,700 re­tail lo­ca­tions, in­clud­ing phar­ma­cies in Tar­get stores. The com­pany started a curb­side pick-up ser­vice a cou­ple of years ago, and it al­ready off ers de­liv­er­ies from about 1,600 lo­ca­tions.

The com­pany says its free, same-day ser­vice in Man­hat­tan will be done within hours. It will hire couri­ers to de­liver pre­scrip­tions and other prod­ucts in se­cure, tam­per-proof pack­ag­ing.

“We're push­ing the en­ve­lope on ba­si­cally serv­ing the pa­tient wher­ever she is,” Ex­ec­u­tive Vice Pres­i­dent He­lena Foulkes told Wall Street an­a­lysts dur­ing a Mon­day morn­ing con­fer­ence call to dis­cuss the com­pany's third-quar­ter per­for­mance.

CVS Health edged Wall Street earn­ings ex­pec­ta­tions in the quar­ter. But the com­pany net­work ex­clu­sions, slump­ing sales from es­tab­lished stores and hur­ri­canes all helped chop its profit more than 16 per­cent, the com­pany said.

Aside from op­er­at­ing drug­stores, CVS also pro­cesses more than a bil­lion pre­scrip­tions an­nu­ally as a phar­macy ben­e­fits man­ager, or PBM.

Its busi­ness has taken a hit from some key cus­tomers that have ex­cluded the com­pany from their phar­macy net­works. Late last year, CVS was re­moved from the net­work of the govern­ment's Tricare pro­gram, which pro­vides cov­er­age for mil­i­tary per­son­nel and their fam­i­lies.

The com­pany also saw an­other PBM, Prime Ther­a­peu­tics, en­ter a re­tail phar­macy net­work agree­ment with Wal­greens Boots Al­liance Inc., which runs the big­gest drug­store chain.

CVS Health said Mon­day those ex­clu­sions were a key rea­son for its third-quar­ter profit drop. The com­pany also took a $55 mil­lion hit in the quar­ter from ma­jor hur­ri­canes that hit the United States and Puerto Rico.

Over­all, CVS Health ear nings fell to $1.29 bil­lion from $1.54 bil­lion in last year's quar­ter. To­tal rev­enue climbed more than 3 per­cent to $46.18 bil­lion. Ear nings, ad­justed for one-time gains and costs, came to $1.50 per share.

An­a­lysts ex­pected, on av­er­age, ear n- ings of $1.49 per share on $46.19 bil­lion in rev­enue, ac­cord­ing to Zacks In­vest­ment Re­search.

For 2017, CVS Health Corp. now ex­pects an­nual ad­justed earn­ings of $5.87 to $5.91 per share, a fore­cast that counts charges due to the hur­ri­canes. That's down from a fore­cast of $5.83 to $5.93 that it made in Au­gust.

An­a­lysts ex­pect, on av­er­age, earn­ings of $5.88 per share, ac­cord­ing to Fac­tSet.

The re­cently re­ported that CVS is in talks to buy the na­tion's third-largest in­surer, Aetna Inc. The deal could be worth more than $60 bil­lion, the news­pa­per re­ported, cit­ing anony­mous sources. CVS Health lead­ers, like their Aetna coun­ter­parts, have de­clined to dis­cuss what they re­ferred to as mar­ket spec­u­la­tion.

Shares of Woonsocket, Rhode Is­land­based CVS Health slipped 97 cents to $68.28 as broader in­dexes rose slightly in morn­ing trad­ing.

The stock had de­clined 12 per­cent since the be­gin­ning of the year, while the Stan­dard & Poor's 500 in­dex has in­creased 16 per­cent.

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