CVS shares fall on slowing retail sales growth

August 05 01:08 2015

Shares of CVS Health (CVS) fell in Tuesday trading after the U.S. drugstore chain reported better-than-expected earnings but said retail sales growth slowed in the second quarter. The decline came after the Woonsocket, R.I.-based company also issued earnings guidance for the current three-month period that fell below the forecasts of Wall Street analysts. CVS shares were down 3.24% at $109.16 in morning trading after the announcement.AP EARNS CVS HEALTH F FILE USA PA

The company reported adjusted earnings per share for the three months that ended June 30 rose 7.7% from the same period last year to $1.22. Net revenues increased 7.4% to $37.2 billion, CVS said. Financial analysts surveyed by Thomson Reuters had forecast earnings per share of $1.20 on $37.18 billion in revenue. Pharmacy sector revenues increased 11.9% to $24.4 billion, primarily driven by growth in specialty pharmacy claims, representing medications used to treat some complex health conditions, plus increases in pharmacy network claims, CVS said.

But while operating profit for the company’s pharmacy services segment increased 7.1%, CVS said operating profit for its retail pharmacy segment fell 1.4%. The company attributed the decline to continued reimbursement pressure — partly offset by increased sales — largely driven by changes in product mix along with last year’s decision to remove tobacco products from CVS stores. The company also said its non-pharmacy same-store sales were impacted by softer customer traffic, partly offset by an increase in shopping basket size. CVS predicted it would report earnings per share of $1.27 to $1.30 for this year’s July-September period, below the $1.37 forecast by the Thomson Reuters analyst survey.

The company also tightened its full-year earnings guidance to a range of $5.11 to $5.18 per share. CVS had previously forecast $4.08 to $5.19 a share. CVS President and CEO Larry Merlo said operating profit in the company’s pharmacy benefit management was in line with the company’s earlier guidance, while retail operating profit exceeded expectations.