CVS Health beat second-quarter expectations and narrowed its 2017 forecast despite a continued sales slump from its established drugstores.
The nation’s second-largest drugstore chain said Tuesday that sales from stores open at least a year slid nearly 3 percent, a rise in generic drug prescriptions hurt the top line of its pharmacies and softer customer traffic affecting the front end, or the rest of the stores.
Revenue from stores open at least a year is considered a key indicator of a drugstore chain’s financial health because it eliminates the impact of stores that have recently opened or closed. CVS Health and its competitors have been struggling to draw customers into their stores for a few quarters now, as they compete for attention with many other retail options, including a burgeoning online market.
CVS Health also has been cutting back on promotions that may bring in business but hurt profitability, and it also is closing a small number of stores this year. CEO Larry Merlo has called 2017 a rebuilding year.
“While we are pleased to report results consistent with our expectations, we won’t be satisfied until the total enterprise returns to healthy levels of earnings growth,” he said Tuesday in a statement announcing the company’s performance.
CVS Health runs 9,700 retail locations, counting the pharmacy and clinic businesses of retail giant Target Corp. That total is second only to Walgreens. CVS Health also processes more than a billion prescriptions annually as a pharmacy benefits manager, or PBM.
PBMs run prescription drug plans for employers, insurers and other customers. They process mail-order prescriptions and handle bills for prescriptions filled at retail pharmacies.
Revenue from the company’s PBM side jumped nearly 10 percent to $32.3 billion in the quarter that ended June 30, helped by new business.
Overall, CVS Health’s second-quarter earnings of $1.1 billion rose 19 percent compared to last year’s quarter, when the company booked a $542 million loss on the early retirement of some debt.
Adjusted results came in at $1.33 per share, with revenue climbing 4 percent to $45.68 billion.
Analysts forecast earnings of $1.31 per share on $45.35 billion in revenue, according to FactSet.
The company also said Tuesday it now expects adjusted earnings of $5.83 to $5.93 per share in 2017, as it raised the lower end of its previous forecast up from $5.77 per share.
Analysts expect, on average, earnings of $5.87 per share in 2017.