CVS' Ryan delivers upbeat message at JPMorgan conference
WOONSOCKET, R.I. Tom Ryan, CVS chairman, president and chief executive officer of CVS/Caremark had an upbeat message for attendees of the JPMorgan Healthcare Conference in San Francisco this week.
During the presentation, which was webcast, Ryan discussed factors impacting December sales, provided an update on its merger with Caremark and stressed the importance of its MinuteClinic business, an operator of in-store health clinics.
CVS recently reported that December same-store sales increased 1.8 percent. Pharmacy same-store sales rose 2.4 percent, and were negatively impacted by about 470 basis points due to recent generic introductions. Front-end same-store sales rose 0.6 percent.
“The flu season and the cough/cold season was significantly less. In fact, the season was the weakest it has been in nine years,” said Ryan. “This does impact front store sales and, obviously, pharmacy sales.”
Ryan added that CVS did see “some evidence” of a cautious consumer in its front store business; however, he reminded investors that front-end discretionary merchandise, such as seasonal items and small appliances, account for a small percentage operating profits.
“We are not totally recession-resistant but it impacts us less than most other retailers … 3 percent of our overall operating profit is in front-end discretionary items so if there’s a risk in the economy it is really not that bad. If we lose 25 percent of that operating profit it is less than one penny a share,” said Ryan.
With regard to its Caremark merger, Ryan said the company has “made tremendous progress” and should generate synergies of at least $660 million in 2008. He also told investors that the company is working with major clients on piloting new services and products to be rolled out in 2008 and beyond.
It is certain that the company’s MinuteClinic business will remain an important player in the business going forward. Today, there are more than 460 clinics. Ryan noted that, while the company is in investment mode today, the in-store clinic business is expected to turn profitable in 2009.
Ryan also said he sees further opportunities within the specialty pharmacy market.
“We have some unique opportunities around specialty growth drivers. If you look at Caremark’s book of business overall we only have 60 percent penetration in specialty of existing lives so we have enormous opportunity,” said Ryan.