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CVS Q4 profit up 6%; acquires Brazilian-based chain

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Woonsocket, R.I. -- CVS Caremark executives expressed optimism Wednesday morning as the company posted record fourth-quarter results and raised its 2013 guidance. The company also disclosed on a conference with analysts that late last week it closed on the acquisition of the privately held Brazilian drugstore chain Onofre.

CVS earned $1.13 billion in the three months that ended Dec. 31. For the full year, CVS earned $3.88 billion, on $123.13 billion in revenue.

Net revenues for the fourth quarter ended Dec. 31 increased 10.9%, to $31.4 billion, up from $28.3 billion in the three months ended in the year-ago period.

As for the retail business, Merlo said the company had “a very strong quarter” with same-store sales increasing 4%. Pharmacy same-store sales also increased 4% as front-end same-store sales increased 3.9%. Revenues in the retail pharmacy segment increased 5.1% to $16.3 billion during the fourth quarter.

Revenues in the pharmacy services segment increased 17.4% to $18.6 billion in the quarter, fueled primarily by 2012 client starts, drug cost inflation and the growth of our Medicare Part D program.

“We are very pleased with the strong results we posted in the fourth quarter and full year 2012 with solid performance throughout the enterprise,” CVS Caremark president and CEO Larry Merlo told analysts during on call. “Our fourth-quarter results reflect strong performances at the high end of our expectations in both the [pharmacy benefit management] and retail segments.”

Regarding the chain’s acquisition of the 44-store Onofre, Merlo said it was not financially material to CVS Caremark. However, it does mark CVS Caremark’s foray into the international drug store space.

“As you know, we have been exploring opportunities for possible international expansion, and we have said many times that our approach would be measured and we would exercise financial discipline,” Merlo said. “We believe this acquisition is a great example of that strategy and action.”

According to Merlo, Onofre has a strong reputation in the marketplace and is successful in tailoring its stores to market to different customer segments.

“We view Brazil as an attractive market given that health care and pharmacy are expected to grow double digits for the next decade, and while chains are prevalent, it is still a highly fragmented market. So, we see nice opportunities to grow the business over time,” Merlo said.

The company’s MinuteClinic business reported strong revenue growth during the quarter. On a comparable basis, sales were up more than 38% versus the year-ago period. As the company headed into January with the strong flu season, patient visits at MinuteClinic reached “unprecedented daily levels,” Merlo said.

The company continued to expand the services offerings within MinuteClinic and focus on wellness programs, along with programs aimed at treating chronic conditions.

During the quarter, the company opened 31 net new clinics and ended 2012 with 640 clinics. As the company previously announced, it is ramping up expansion plans and expects to open another 150 clinics this year. It plans to end 2013 with just under 800 clinics.
 

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