CVS Health on Wednesday reported that fourth quarter revenue rose 12.5% to $54.4 billion, in a period that it completed its $70 billion acquisition of health insurer Aetna. Revenues in the quarter from front-store retail plus long-term care operations rose 5.4% to $22 billion, mostly driven by a prescription volume and branded drug price bumps, partially offset by reimbursement pressure and generic drug introductions, according to a company press release.
Total same-store sales rose 5.7%, but front-store same-store sales rose just 0.5%, as pharmacy (7.4%) and prescription volume (9.1%) same-store increases carried the day.
Adjusted operating income rose 4.5% and 2.5% for the year, the company also said. Net loss, for both the quarter and full year, was driven primarily by goodwill impairment charges in the Retail/LTC segment and the increase in interest expense due to the financing of the Aetna acquisition, the company said.
With the completion of its Aetna merger, the morphing of CVS Health from a traditional drugstore retailer to a health care company is nearly done. That's showing up in the front of the store, not just reflected in the relatively paltry retail comps, but also in what it's selling — health care products are even driving front-store sales, the company said in its release.
That means that the company is increasingly vulnerable to shifts in the health care sector more than the retail sector.
"CVS' fourth quarter results were a mixed bag with its long term care business being a drag, prompting the company to take a $2.2 billion impairment charge for Omnicare on top of the $3.9 billion charge the company took in the second quarter," Moody's Investors Service Vice President Mickey Chadha said in comments emailed to Retail Dive.
The retail business "did fine," he also said, though he included pharmacy and prescription growth in that assessment. "Looking forward, 2019 will be a challenging year for the company as it integrates the Aetna operations while combating continuing reimbursement pressure, increased competition, and weakness in the long term care business."
The retailer is testing out a "HealthHub" store concept that, at least from photographs, resembles a doctor's office more than a drugstore — an enterprise that once featured soda fountains and high-end perfumes. While CVS like rival Walgreens has made an effort to boost its beauty sales, it looks increasingly like a place to go for a flu shot rather than for mascara.