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CVS Gains Share in Both Front Store and Pharmacy

Retailer delivers impressive revenue growth despite mixed COVID-related trends and continued economic uncertainty
Marian Zboraj, Progressive Grocer
CVS' pharmacy services segment grew full year revenues by 11% with adjusted operating income of $7.4 billion.

At a time when companies are conducting major layoffs and shuttering businesses, CVS is reporting a strong financial year with another quarter of impressive performance in both the pharmacy and front store. For fourth quarter ending Dec. 31, the company’s total revenues increased to $83.8 billion, up 9.5% compared to prior year. The retailer reported GAAP diluted EPS of $1.75 and adjusted EPS of $1.99.

“Our Q4 market share in pharmacy is now approximately 27%,” pointed out Prem Shah, chief pharmacy officer, during the company’s earnings call. “We grew share another 12 basis points, and we are about 117 basis points higher than the pre-pandemic share.”

[Read more: “CVS Debuts Personal Care Brand”]

Pharmacy revenue increased by nearly 8% versus the prior year and delivered another quarter of year-over-year market share gain. Front store revenues grew by nearly 7%, driven by demand for consumer health and cough, cold and flu products.

Despite a decrease in COVID-19 vaccinations, Chief Customer Officer Michelle Peluso cites company strengths in omnichannel investments, modernizing store fleet, enhancing merch mix, improving service, and its pricing and promotional strategy.

“This is a kind of underlying momentum and foundation that we think will help us continue our growth trajectory,” she said. “But at the same time, we absolutely recognize there is also opportunity to invest in cost structure and productivity improvements. So, we are investing in supply chain, for instance, to optimize, modernize and selectively automate.”

As a result, Peluso said the company believes it will bear a significant return. “We are also finding lots of other opportunities to improve inventory turns and reduce overall product loss,” she added. “It's this combination of growth on site productivity improvements that we think will continue to fuel our performance not just in 2023, but beyond.”

Looking back to full year 2022, CVS reported total revenue of $322.5 billion, an increase of 10.4%. This led to a full year adjusted EPS of $8.69, representing an increase of 9.7% off 2021 adjusted EPS baseline of $7.92. The company generated $16.2 billion in cash flow from operations. 

Adjusted operating income of $1.8 billion declined 25.1% versus prior year, but Shawn Guertin, EVP and CFO at CVS, said that was largely in line with internal expectations, “driven by decreased COVID-19 vaccinations and diagnostic testing, continued pharmacy reimbursement pressure, and increased investments in the segment's operations and capabilities, including the vast majority of a discretionary bonus payment to front-line colleagues.

CVS' strong fiscal year was boosted by several highlights, including:

  • Entering into a definitive agreement to acquire Signify Health, a leader in home Health Risk Assessments, value-based care and provider enablement with a network of more than 10,000 clinicians across all 50 states.
  • Announcing a 10% increase to the quarterly shareholder dividend, which became effective with the Feb. 1 dividend distribution. CVS returned $2.9 billion to shareholders through dividends, while repurchasing 34.1 million shares of common stock and authorizing a new $10.0 billion share repurchase program.
  • Increasing unique digital customers by 7 million to over 47 million, reaching 8 million active users on CVS Health’s individualized Health Dashboard and interacting with nearly 5 million customers daily across community footprint.
  • Deepening executive bench with several key appointments, including Dr. Amar Desai as president, health care delivery, and Tilak Mandadi as EVP and chief data, digital and technology officer.

“Last year was defined by outperformance across our foundational businesses, robust cash flow from operations and meaningful progress against our value-based care delivery strategy,” said Karen S. Lynch, CVS Health president and CEO. “2022 was a year of progress, and we continue to build on that momentum with bold moves that will improve the health care experience.”

The company didn't waste any time on moving to improve its health care experience when it announced it was acquiring Oak Street Health on the same day it released its financial results. CVS entered into a definitive agreement to acquire Oak Street Health's outstanding shares for $39 per share in cash, representing a total transaction value of approximately $10.6 billion. “The acquisition of Oak Street Health will broaden our value-based care platform into primary care and accelerate our long-term growth,” commented Lynch. “Primary care drives patient engagement and positive clinical outcomes.”

Looking ahead, CVS issued its full-year 2023 GAAP diluted EPS guidance range of $7.73 to $7.93 and reaffirmed its full-year 2023 adjusted EPS guidance range of $8.70 to $8.90. The company also issued its full-year 2023 cash flow from operations guidance range of $12.5 billion to $13.5 billion.

With its CVS Pharmacy subsidiary operating almost 10,000 locations nationwide, Woonsocket, R.I.-based CVS Health has over 300,000 colleagues – including more than 40,000 physicians, pharmacists, nurses and nurse practitioners. The company is No. 7 on The PG 100, Progressive Grocer’s 2022 list of the top food and consumables retailers in North America

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