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November 6, 2019

CVS announces 22 store closures; 3Q profits up 10% on Aetna deal

Photo | CNN Money A CVS storefront.

Pharmacy giant CVS Health Corp. on Wednesday said it will close 22 “underperforming” drugstores in early 2020, adding to the 46 stores it shuttered earlier this year.

The Rhode Island-based retail pharmacy and benefits manager, which now has a major Hartford presence following its $69 billion purchase of health insurer Aetna last year, did not disclose which sites would be closed in 2020.

CVS, which operates 9,900 retail locations and 1,100 walk-in medical clinics across the country, said it already recorded a $96 million impairment charge related to the planned closure of the 22 stores. That’s in addition to a $135 million charge the company took in the first quarter from 46 store closures earlier this year. 

CVS is not the only pharmacy operator closing locations.

Walgreens in recent months announced it will close about 200 locations in the U.S. in an effort to cut costs.

“We believe these decisions will generate enhanced longer-term performance,” CVS CFO Eva Boratto said Wednesday in a third-quarter earnings call with investors. “Our real estate footprint remained very productive, and we will look for opportunities to further improve the performance in our portfolio.”

CVS also announced Wednesday that its third-quarter profits rose 10.1 percent thanks to its recent takeover of Aetna.

In the July-September period, CVS reported net income of $1.53 billion, or $1.17 a diluted share, up from $1.39 billion, or $1.36 a diluted share, a year earlier.

CVS said revenues rose 36.5 percent to $64.81 billion in the quarter, which beat Wall Street estimates of $63.03 billion, according to Zacks Investment Research.

Its healthcare division generated $17.1 billion in revenue, up from $641 million in the year-ago period. That increase was driven by its purchase of Aetna.

CVS said its pharmacy services segment recorded over $36 billion in revenue, up 6.4 percent; and retail/LTC notched $21.5 billion, up 2.9 percent.

CVS’ higher revenues, however, were partially offset by a nearly 73 percent increase in operating expenses driven, in part, by costs associated with its Aetna purchase and a $205 million pre-tax loss on the July sale of its Brazilian subsidiary, Drogaria Onofre.

“As we approach the first anniversary of the Aetna acquisition, we are increasingly confident in the strength of our broad and differentiated assets as a combined company and our ability to deliver compelling value to our customers and the communities we serve,” CVS CEO Larry Merlo said in an earnings release.

CVS raised its full-year earnings forecast from the range of $6.89 to $7 to $6.97 to $7.05.

CVS shares of $70.42 were up 4.60 percent as of about 10 a.m. Wednesday, according to Nasdaq.

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