WOONSOCKET, R.I. — CVS Caremark Corp. reported a 21% drop in third quarter profit. The company said earnings were dragged down by its pharmacy benefit management (PBM) unit, which lost business from previously canceled contracts.
CVS Caremark Corp. reported a 21% drop in third quarter profit. The company said earnings were dragged down by its pharmacy benefit management (PBM) unit, which lost business from previously canceled contracts.
Net income for the quarter ended September 30 fell to $809 million from $1.02 billion a year ago, when earnings benefited from $156 million in tax benefits.
Third quarter revenue declined 3.1% to $23.9 billion, due in part to the lost PBM contracts. Yet sales in the retail drug store unit rose 4.1% to $14.2 billion, and same-store sales were up 2.5%.
The results led CVS to trim its full-year guidance to between $2.68 and $2.70 per share from $2.68 to $2.73 previously.
Over the past year the Caremark unit has lost billions of dollars in contract revenue and was a major reason why PBM revenue fell 8.5% to $11.9 billion in the third quarter. Besides canceled contracts with private employers, CVS said it has lost patients from its Medicare drug coverage plans. Management noted, however, that significant new PBM business has been picked up for 2011.
On the retail side, executives said shoppers remain wary in their buying habits, but that has helped CVS in at least one area. "We think it’s a pretty cautious consumer out there, and in fact it’s one of the reasons that’s driving our private label and proprietary products, as well as our proximity to their home and the value proposition overall," chief financial officer David Denton said.
A few days before the financial results were released, CVS announced that it was slashing 300 jobs to help reduce costs.