CVS Caremark Corp. posted a 39.3 percent jump in net income for the third quarter ended Sept. 30, but concerns about its pharmacy benefits-management business, which lost $2 billion in contracts, sent shares down more than 20 percent Thursday.
The drugstore chain’s profits were $1.02 billion, or 71 cents a diluted share, up from $732.5 million, or 50 cents, in the same period a year ago.
During the company earnings call Thursday, Tom Ryan, chairman, president and chief executive officer, told analysts CVS has promoted David Denton to the post of executive vice president and chief financial officer, effective Jan. 2. He replaces David Rickard, who, in February, announced his intention to retire.
Third-quarter sales rose 18.1 percent to $24.64 billion from $20.86 billion in the year-ago period. Comparable-store sales were up 5.7 percent in the quarter, while front-end comp-drugstore sales inched up 0.8 percent in the quarter. Same-store prescription sales increased 8 percent, the chain’s largest gain in two years, said Ryan.
Ryan said CVS is seeing an uptick in traffic in its store, but the chain’s front-end performance indicates shoppers are still holding back. To court value seekers, CVS added 250 private label items during the quarter and expects to end the year with a total of 900 new private label products. Consumers are responding. Ryan noted private label sales more than doubled, compared with the rate of non-private label sales in the front end. “We expect consumers to remain value-conscious…for at least a few quarters,” said Ryan.
Shares of the company ended the day at $28.87, down $7.28, or 20.1 percent.
The quarter also marked a milestone for CVS, as the drugstore opened its 7,000th store. It also opened or remodeled 65 doors and closed six for a net total of 59 stores, putting the company on track to add 3 percent retail square footage growth this year, said Ryan.