CVS Health Corp. CVS -4.90% got a sales boost from doling out more than 59 million Covid-19 vaccines and tens of millions of tests last year, but doesn’t expect the same benefit this year, the company said Wednesday.
Covid-19 vaccine and test demand surged during the end of last year as the Omicron variant swept through the U.S. CVS same-store sales, those from stores or digital channels operating for at least 12 months, grew by 13.4% in the fourth quarter from a year earlier, when the vaccines were just being authorized.
Covid-19 vaccinations, in-store testing and take-home test kits made up around 35% of operating profit for CVS’s retail segment in the fourth quarter. On an adjusted basis, the company posted earnings of $1.98 a share, beating analyst expectations of $1.83 a share, according to FactSet.
The company maintained its guidance for the current year of adjusted earnings of $8.10 to $8.30 a share, noting that benefits from Covid-19-related sales could wane, especially in the second half of 2022. On a conference call with investors Wednesday, executives said they didn’t expect the authorization of a new Covid-19 booster shot this year.
That sent the company’s stock lower Wednesday. CVS stock fell around 4% in morning trading. “Given that CVS maintained the ’22 guidance range despite the large Covid benefit this quarter, in our view, the Covid benefit is likely to moderate,” said analyst Steve Valiquette at Barclays.
For the current year, CVS expects vaccine volume to fall 70% to 80% versus last year and in-store Covid-19 testing to fall 40% to 50%, Chief Financial Officer Shawn Guertin told analysts on the conference call. It expects to sell more at-home tests in 2022 from the prior year, he said.
CVS executives say they have won over new customers throughout the pandemic and they expect some of those shoppers to stick around. “We have seen a lot more traffic in the stores and that’s manifesting itself in more prescriptions,” and spending, Mr. Guertin said.
CVS, drugstore rival Walgreens Boots Alliance Inc., grocery chains and big-box stores such as Walmart Inc. have played prominent roles in the U.S. effort to distribute Covid-19 vaccinations across the country. Many have also been key to the federal effort to make available rapid, at-home Covid-19 tests, which were outstripped by demand in the latest quarter as Americans sought to get tested around the holidays.
Before the pandemic CVS and other drugstores were struggling to fend off a growing number of online rivals. Covid-19 has proved a welcome tailwind.
Now CVS is in the midst of trying to remake itself as a broad healthcare provider. The retailer said last year it would close about 900 of its around 10,000 stores over three years and open more primary-care clinics.
CVS plans to transition locations into three types: primary-care clinics, so-called health hubs that offer more routine health services and retail pharmacies, Chief Executive Karen Lynch said Wednesday. The company has said it aims to hire more doctors to bring that plan to life. CVS is also evaluating acquisition options in the space, said Ms. Lynch.
Staffing shortages have stressed both CVS and Walgreens as pharmacists and pharmacy technicians have scrambled to juggle Covid-19 testing and vaccines with filling prescriptions and serving customers.
The retailer had significant hiring through the year, Ms. Lynch said, including a one-day virtual event that attracted 45,000 new workers. It was affected by Omicron infections among workers, she said, but maintained strong opening hours. Walgreens and CVS shut some pharmacies on weekends during the Omicron surge.
A CVS store in New York City. The company’s quarterly revenue and profit beat analyst expectations.
Photo: Gabby Jones for The Wall Street Journal
Last year CVS said it would raise starting wages for workers to $15 per hour by this July. “I continue to evaluate that minimum wage to see if there’s more that we could or should be doing as we continue to address labor shortages in the country,” Ms. Lynch said.
The Woonsocket, R.I.-based company has seen its costs rise, in part due to wage increases, along with its sales over the past year. Total cost of products sold rose to $46.38 billion in the quarter, up from $42.45 billion a year earlier.
In the three months ended Dec. 31, CVS said sales in its retail business rose 12.7% from a year earlier to $27.11 billion.
The company posted a quarterly profit of $1.31 billion, or 98 cents a share, up from $973 million, or 74 cents a share, in the year-ago period.
CVS’s total revenue, which includes its health-insurance and pharmacy-services businesses, grew by 10.1% from a year earlier to $76.60 billion, the company said. Analysts surveyed by FactSet expected sales of $75.66 billion.
The company’s fourth-quarter results included an impairment charge of $1.4 billion related to the company’s store-closure plan.
Write to Will Feuer at [email protected]
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