FINANCE

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

BY Marianne Wilson

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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Zillow enters home improvement space

BY CSA STAFF

Zillow has launched an iPad app and a Web site focused on the home improvement marketplace to provide inspiration, price transparency and lead generation for contractors.

Seattle-based Zillow disrupted the real estate industry seven years ago when it introduced a home valuation service and it quickly because a household name in the real estate information world. The company’s new service, called Zillow Digs, looks to leverage the large number of consumers who are using the Zillow Web site and predisposed to home improvement projects to provide inspiration and connect them with professionals who can perform the work.

"Tens of millions of home buyers shop for homes on Zillow each month, and home improvement is a natural next step for us in consumer empowerment and transparency of information to help people make smarter decisions," said Zillow CEO Spencer Rascoff. "I’m also excited to introduce a revolutionary new tool for consumers: Digs Estimates. This first-of-its-kind remodeling cost estimate algorithm was created by Zillow’s industry-leading team of economists and data analysts who produce extensive housing data and research."

The goal of Zillow Digs, beyond providing home shoppers and homeowners visual inspiration and an understanding of the cost of remodeling projects, is to show the estimated cost of thousands of real bathrooms and kitchens. Those costs are based on a proprietary algorithm which includes real-world data from local contractors such as size, materials, finish level, and regional labor and material rates. Armed with such information, Zillow contends home shoppers and homeowners will be able to create more realistic budgets appropriate for their specific market.

In addition, users can browse tens of thousands of photos and see actual costs for where they live of the projects being viewed. The platform also enables the creation and sharing of ideas and provides a way for people to connect with others, comment on projects and follow those with similar interests. Home improvement professionals can create a free Zillow Digs profiles with contact information, photos of past work and a link to their website. Professionals also can market their expertise and their business by creating Boards, commenting on others’ photos and answering questions.

 

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Hiring surge begins for home improvement retailers

BY CSA STAFF

Home Depot expects to be busy this spring and is hiring 80,000 seasonal employees, 10,000 more than last year, to keep pace with the demand.

The hiring announcement by Home Depot follows a similar announcement by Lowe’s two weeks earlier that it planned to hire 45,000 seasonal employees. The increased hiring levels suggest the nation’s two largest home improvement retailers are optimistic about consumers demand amid a recovery in the housing market.

"Spring is always a special season for us, when we can offer employment opportunities for literally tens of thousands of Americans," said Tim Crow, EVP of human resources for Home Depot. "We find some of our best associates during our peak season, and many of them have built long, meaningful careers with us."

Home Depot operates 2,256 stores in the U.S., Canada and Mexico.

Two weeks earlier, Lowe’s said it planned to hire approximately 45,000 seasonal employees as well as 9,000 permanent part-time employees at its 1,745 stores in the U.S., Canada and Mexico.

Seasonal employees typically work between 20 and 25 hours per week throughout the spring and summer when Home Depot and Lowe’s stores are busiest with contractors and do-it-yourselfers are taking on indoor and outdoor projects. Many of the positions entail demanding, physical labor, but with the nation’s unemployment rate stubbornly hovering around 8% both retailers are likely to have plenty of interest from job seekers.

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