CVS profit declines but still beats Street
CVS Health Corp. reported lower profit in its first quarter amid pressure by more generic drugs and softer customer traffic.
Net income for the three months ended March 31 decreased 16.9% year over year to $953 million. CVS said the decline was primarily driven by the decline in operating profit, partially offset by a lower interest expense of $31 million related to refinancing activity in the prior year, as well as the improvement in the effective income tax rate, from 39.4% to 37.3%.
Net revenues rose 3% to $44.5 billion, up from $43.2 billion in the year-ago period. Revenues in the retail/LTC segment decreased 3.8% to $19.3 billion amid reimbursement pressure. The decrease was largely driven by a 4.7% decline in same-store sales, continued reimbursement pressure and an increase in generics.
Pharmacy same-store sales decreased 4.7% and were negatively impacted by approximately 480 basis points due to recent generic introductions. Same-store prescription volumes declined 1.4%. Front store same-store sales declined 4.9%.
Revenues in CVS’ pharmacy services segment were robust, increasing 8.5% to $31.2 billion. This increase was primarily driven by growth in pharmacy network claim volume as well as brand inflation and growth in specialty pharmacy, partially offset by increased generic dispensing and price compression.
“2017 is off to a solid start as we posted results this quarter that surpassed our expectations,” said president and CEO Larry Merlo. “At the same time, we generated $3.1 billion of free cash and continued to return value to our shareholders through high-return investments in our business as well as dividends and share repurchases. However, while we are pleased with our financial performance versus our expectations, we won’t be satisfied until the company returns to sustainable, healthy earnings growth.”
During the first quarter, CVS opened 27 stores and closed 60 stores. In addition, it relocated 10 retail stores. As of March 31, the company operated 9,676 retail stores, including pharmacies in Target stores, in 49 states, the District of Columbia, Puerto Rico and Brazil.
As previously announced, CVS intends to close a total of approximately 70 retail stores during 2017 and expects to take a cumulative charge of approximately $220 million primarily associated with the remaining lease obligations of such stores.
Online made-to-measure menswear brand focusing on brick-and-mortar expansion
Indochino is growing its fledgling store footprint and has the U.S. market in its sights.
The Vancouver, Canada-based online retailer has opened its 13th store, at Metropolis in Metrotown in Burnaby, a suburb of Vancouver. The approximate 2,000-sq.-ft. store follows the recent openings of additional locations at West Edmonton Mall, Edmonton, and Chinook Centre, Calgary.
Indochino plans to open a total eight stores (or “showrooms”) in North America in 2017, including five in the United States, where it currently has locations in New York City, Boston, Philadelphia, San Francisco, and Los Angeles. The company is actively investigating new markets in major cities such as Washington, D.C., and Chicago, and is also looking to open secondary locations in large markets such as New York.
Indochino’s stores are handsome and sophisticated looking, and designed to bring the brand’s online made-to-measure experience to the physical space. The brand promises a “luxury tailoring experience without the high price tag.”
Customers are paired with a “style guide” who tailors the appointment based on each customer’s needs and helps him to build a one-of-a-kind suit or shirt. The associates take measurements, assist with fabric selection, and walk shoppers through a wide variety of personalization options, including buttons, pockets, lapels and monograms. Each garment is made-to-order and delivered in around four weeks.
"Creating an exceptional customer experience is at the core of our brand and our showrooms are a great example of this, where each appointment is a unique and very engaging experience," stated Drew Green, CEO, Indochino. "Our goal is not simply to sell garments, but to build a lasting relationship so that there is no one else they would rather come to for style advice when building out a wardrobe for work, for a wedding or for every day."
Trendy online sneaker brand eyes physical stores
Following in the footsteps of Warby Parker, Bonobos and the like, another online startup is ready to plant some brick-and-mortar roots.
Brooklyn, New York-based sneaker brand Greats plans to open at least 10 locations over the next two years, according to The New York Business Journal.
The retailer, which features retro and lifestyle kicks, is signing short-term leases ranging from three months to one year, and each location will be positioned as “a community hub for sneaker lovers,” the report said.
It’s a bold move for Greats, especially at a time when established brands are closing stores. The company is backed by Resolute Ventures with roughly $4.5 million raised between a seed round and Series A, according to The New York Business Journal.
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