CVS reports big decline in earnings

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Posted 8:38AM on Thursday, May 9, 2002

PROVIDENCE, R.I. - Drugstore chain CVS Corp. on Wednesday reported that its first-quarter earnings fell nearly 21 percent, results that still managed to meet Wall Street expectations. CVS earned $175.7 million, or 43 cents a share, in the three-month period ended March 30, compared with $221.7 million, or 54 cents a share, in last year's first quarter. The latest results matched the consensus forecast of analysts surveyed by Thomson Financial/First Call. CVS upped its earning forecast by a penny last month. Net sales for the first quarter were $6.0 billion, up from $5.4 billion during the first quarter of 2001. "While 2002 will be a transition year as the benefits of our initiatives take hold, our first quarter performance reflects the improving momentum of our business and the opportunities that lie ahead as we continue to invest for the future," said president, chairman and chief executive Tom Ryan. Executives told investors total sales should increase 8 percent to 9 percent in the second quarter, driven primarily by pharmacy sales. The company expects earnings of 43 cents per share for the second quarter, the same forecast by analysts. For the year, executives said earnings growth would be in the 8 percent to 10 percent range, and earnings would be above last year's $1.56 earnings a share, though the company did not released a figure. The national chain has been closing underperforming stores mostly in the Midwest and scouting or opening ones in new markets such as Arizona, Texas and Nevada. CVS has been developing a strategy in Arizona for the past two years and plans to open its first store early next year, said spokesman Todd Andrews. Eckerd's, a major competitor, announced last month it planned to open stores in that state. CVS also has been on a promotional binge to bring in new customers and encourage the use of a discount sales card introduced about a year ago. "We're doing a lot of activity - promotional, ExtraCare (discount card) activity, new market entries. We're balancing this," Ryan said. "The measure for us is improved productivity at each store. The keys for us are driving top line revenue growth and more traffic in our stores." During the first quarter, CVS opened 47 new stores, closed 247 and relocated 29 others. As of March 30, CVS operated 3,991 retail and specialty pharmacy stores in 32 states and the District of Columbia. In early afternoon trading on the New York Stock Exchange, CVS shares were up $1.46 at $35.08.