CVS Misses The Street’s Expectations Due To Falling Foot Traffic

Though general pharmacy sales were on the incline, general store traffic fell in Q2 for CVS, meaning that the retailer’s growth missed analyst expectations when earnings were announced this morning. Sales were up 2.1 percent, a slight miss on the 2.5 percent forecast ahead of earnings. It was also well below the 4.2 percent increases CVS logged during Q1 2016.

Profit was also feeling the tug of gravity, down from $1.27 billion a year ago at this time to $924 million. Revenue was o the upswing, however, increasing by 18 percent to $43.73 billion. That was also a miss when stacked up against expert predictions; analysts were calling for $44.28 billion in revenue, according to Thomson Reuters.

Guidance, in light of the sobering results, was dimmed some to $5.81 to $5.89 per share from guidance of $5.73 to $5.88 per share and average analyst estimates of $5.82.

The lesson this quarter, it seems, is that even with a bigger push into health services (dropping tobacco sales, installing minute clinics) they aren’t quite getting the consumer traction they want. And CVS is facing an ever more diverse lineup of competitors; Ulta and Sephora are aggressively pursuing the former drugstore staple beauty products, while Walgreens and Rite Aid are merging into a single entity which would make them the nation’s large drugstore retailer.

Despite the looming issues, CVS CEO Larry Merlo was generally optimistic about the results.

“I’m very pleased with our solid second quarter results across the enterprise,” Merlo said. “Operating profit in the Retail/LTC Segment was in line with expectations while operating profit in the Pharmacy Services Segment exceeded expectations. At the same time, we have generated substantial free cash flow year-to-date and continued to return significant value to our shareholders through dividends and share repurchases.”

CVS, to the surprise of some, offered no commentary on the progress of CVS Express, its curbside pick-up program which launched about 4 months ago. Consumers using their mobile phones are able to place an online order and then CVS leverages Curbside’s arrival detection software to alert CVS staffers when the customer is nearing the store, making it easier to literally meet them curbside with their order.


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