Retail pharmacy chain CVS Health Corporation’s revenue rose to $98.9 billion in the second quarter of this year, an 8.4 per cent increase from $91.2 billion during the same period last year.
“Within a drugstore sector that remains challenged, CVS’s latest results show it is something of an island of stability,” said GlobalData MD Neil Saunders.
Its net income, however, dropped from $1.7 billion to $1 billion year on year, with its operating income seeing a 21.8 per cent decrease, declining from $3 billion to $2.3 billion.
This was due to $833 million in litigation charges related to two court decisions regarding CVS’s past business practices.
The company’s pharmacy and wellness segment saw a 12.5 per cent increase, rising from $29.8 billion to $33.5 billion year-on-year, with its adjusted operating income increasing 7.6 per cent, both of which were driven by pharmacy drug mix and increased prescription and front store volume.
“Prescription volumes held up well and were boosted a little by the closure of some Rite Aid stores, especially later in the quarter,” said Saunders.
“This trend should accelerate into the balance of the year as CVS is preparing to formally acquire prescription files and some locations out of the Rite Aid bankruptcy.”
GlobalData found that loyalty at CVS remained relatively weak, with poor price perceptions.
The company faces heightened pressure as Amazon’s fast delivery service expands into more rural areas, which reduces the need for in-store prescription refills.
Saunders stated that CVS’s improved prescription operations were a large factor in its increased front-of-store business, which increased by 1.6 per cent on a total basis and by 3.4 per cent in same-store terms.
“New technology, such as an app for patients to manage their prescriptions better, has improved satisfaction and use of the pharmacy, which, in turn, has helped sales of general merchandise,” said Saunders.
“The app is part of CVS’s wider strategy of deploying technology to increase efficiency and improve transparency for healthcare customers.
“We think this is a very sensible move, not least because it helps build a defensive moat in a segment that is coming under fire from digital players like Amazon.”
