CVS to debut free delivery service

It’ll start in NYC; 3Q earnings fall but beat expectation

Posted: November 7, 2017 at 2:17 a.m.

A customer nears the entrance of a CVS Health Corp. store in downtown Los Angeles in October. The pharmacy chain on Monday reported third-quarter profits of $1.29 billion, down from $1.54 billion a year ago.

CVS Health is cranking up prescription deliveries to customer homes or workplaces as the drugstore chain tries to squeeze more of an edge from a store network that puts 70 percent of the U.S. population within three miles of one of its locations.

The nation's second-largest drugstore chain will start offering free, same-day deliveries in December from its Manhattan sites. It will also expand next-day deliveries nationwide early next year while also bringing the same-day service to several more cities.

Drugstores and other retailers have been pushing more customer-friendly services in recent years in part to counter competitive pressure from Amazon. The online retail giant already offers to its Amazon Prime members in some cities same-day deliveries of consumer goods typically sold in drugstores. That's a threat to the networks of thousands of stores built by chains such as CVS in order to get closer to the customer.

CVS Health Corp. plans to expand same-day deliveries to Miami, Boston, Philadelphia, Washington, D.C., and San Francisco by early next year.

A company spokesman said the delivery service would be a faster alternative and have a wider reach than its mail-order business.

CVS Health runs more than 9,700 retail locations, including pharmacies in Target stores. The company started a curbside pickup service a couple of years ago, and it already offers deliveries from about 1,600 locations.

The company says its free, same-day service in Manhattan will be done within hours. It will hire couriers to deliver prescriptions and other products in secure, tamperproof packaging.

"We're pushing the envelope on basically serving the patient wherever she is," Executive Vice President Helena Foulkes told Wall Street analysts during a Monday-morning conference call to discuss the company's third-quarter performance.

CVS Health edged Wall Street earnings expectations in the quarter. But the company network exclusions, slumping sales from established stores and hurricanes all helped chop its profit more than 16 percent, the company said.

Aside from operating drugstores, CVS also processes more than a billion prescriptions annually as a pharmacy benefits manager.

Its business has taken a hit from some key customers that have excluded the company from their pharmacy networks. Late last year, CVS was removed from the network of the government's Tricare program, which provides coverage for military personnel and their families.

The company also saw another pharmacy benefits manager, Prime Therapeutics, enter a retail pharmacy network agreement with Walgreens Boots Alliance Inc., which runs the biggest drugstore chain.

CVS Health said Monday that those exclusions were a key reason for its third-quarter profit drop. The company also took a $55 million hit in the quarter from major hurricanes that hit the United States and Puerto Rico.

Overall, CVS Health earnings fell to $1.29 billion from $1.54 billion in last year's quarter. Total revenue climbed more than 3 percent to $46.18 billion.

Earnings, adjusted for one-time gains and costs, came to $1.50 per share.

Analysts expected, on average, earnings of $1.49 per share on $46.19 billion in revenue, according to Zacks Investment Research.

For 2017, CVS Health Corp. now expects annual adjusted earnings of $5.87 to $5.91 per share, a forecast that counts charges attributed to the hurricanes. That's down from a forecast of $5.83 to $5.93 that it made in August.

Analysts expect, on average, earnings of $5.88 per share, according to FactSet.

The Wall Street Journal recently reported that CVS is in talks to buy the nation's third-largest insurer, Aetna Inc. The deal could be worth more than $60 billion, the newspaper reported, citing anonymous sources. CVS Health leaders, like their Aetna counterparts, have declined to discuss what they referred to as market speculation.

Shares of Woonsocket, R.I.-based CVS Health fell $2.45, or 3.5 percent, to close Monday at $66.80.

Business on 11/07/2017