CVS CVS Health Corporation

CVS Health Corp. logged disappointing sales growth in its latest quarter as new generic drug introductions cut into its pharmacy business and store traffic declined.

The Woonsocket, R.I.-based drugstore giant is increasingly relying on its pharmacy benefits management division for growth. The business, which manages prescription drug coverage for health insurers, is attracting more clients by helping lower drug spending as some manufacturers are pushing through sharp price increases. Meanwhile, CVS has expanded its retail footprint by folding in about 1,6000 Target Corp. pharmacies it bought last year.

In the latest period, sales at existing CVS pharmacies increased 2.1% during the quarter, slower than the 4.2% pace notched in the first quarter and short of the 2.5% rate analysts expected. The metric rose 3.9% in the company's pharmacy business as prescription volumes grew 3.5% growth—both down from gains of 5.5% and 5.9%, respectively, in the first quarter. CVS said recent generic drug introductions hurt pharmacy sales.

Meanwhile, CVS' front-of-store business weakened during the period as customer traffic fell and because the early Easter shifted some sales out of the quarter. Same-store sales in the front declined 2.5% despite the company's efforts to squeeze out more profits by increasing sales of private-label items and expanding its selection of beauty products.

In all for the quarter, CVS reported a profit of $924 million, or 86 cents a share, down from $1.27 billion, or $1.12 a share, a year earlier. Excluding intangible asset amortization, among other items, per-share profit rose to $1.32 from $1.22.

Revenue increased 18% to $43.73 billion.

Analysts predicted $1.30 in adjusted earnings per share and $44.28 billion in revenue, according to Thomson Reuters.

For the year, CVS cut its overall earnings forecast and narrowed its view on an adjusted basis. The reduction in overall earnings is due to acquisition-related integration costs and the impact of a loss on an early extinguishment of debt.

Excluding those items, CVS said it now sees per-share earnings of $5.81 to $5.89 this year, compared with an earlier range of $5.73 to $5.88 and the average analyst estimate of $5.82.

Shares in the company, down 17% over the past 12 months, slipped 0.5% to $93 in premarket trading.

Write to Lisa Beilfuss at lisa.beilfuss@wsj.com

(END) Dow Jones Newswires

August 02, 2016 08:25 ET (12:25 GMT)

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