CVS Beats Earnings Estimate But Front-End Comps Lag

For the first quarter ended March 31, CVS posted net income of $1.22 billion, or $1.07 per diluted share, versus $1.13 billion, or 95 cents per diluted share, in the year-earlier period. Comparable store sales increased 1.2% over the first quarter of last year, but front store comps, including general merchandise such as home goods, slipped 6.1%, the company reported.

Adjusted earnings per share were $1.14 per share versus $1.02 in the quarter last year, according to the company. Analysts polled by Thomson Reuters expected earnings per share of $1.08 on average.

Front end comps would have been about 800 basis points higher if tobacco, which the company has phased out, and the estimated associated basket sales were excluded from the results from last-year’s first quarter. Overall, front store comps were impacted by softer customer traffic, partially offset by an increase in basket size, CVS maintained.

Net revenues were $36.33 billion versus $36.69 billion in the year-prior quarter.

“Adjusted earnings per share increased 12.2%, to $1.14, five cents above the high end of our guidance range, with operating profit in the retail business in line with our expectations,” CVS president and CEO Larry Merlo stated.  “We also generated approximately $1.6 billion in free cash flow, and we continued to return significant value to our shareholders through our disciplined capital allocation practices.”

During the three months ended March 31, 2015, CVS opened 38 new retail drugstores and closed 10. The company also relocated 12 retail drugstores. As of March 31, CVS operated 8,006 locations in 47 states, the District of Columbia, Puerto Rico and Brazil, including 7,850 retail drugstores.