Drug Retail Weekly Notes: Walgreen, CVS Caremark & Rite Aid

by Trefis Team
CVS Health
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Drug retailer CVS Caremark (NYSE:CVS) announced solid Q1 results this week, capitalizing on the Walgreen-Express fallout that brought millions of new prescriptions to its stores as well as delivered a solid growth in its PBM business, benefiting from the UAM acquisition and expansion of Medicare Part D, specialty pharmacy and its Maintenance Choice plans. Walgreen‘s (NYSE:WAG) April sales continued to stay depressed as a result of ending contract with Express Scripts while Rite Aid posted healthy sales growth during the month. Its stock also gained 5% on Thursday after it announced another round of debt refinancing to ensure timely payment of its upcoming debt. Read more on the updates and and the outlook for the industry.

See our complete analysis of Rite AidWalgreen CVS Caremark

Walgreen‘s same store sales dipped by 6% in April with an average of 8% fewer prescriptions filled at Walgreen pharmacies owing to its split with pharmacy benefits manager Express Scripts (NYSE:ESRX). On the other hand, its biggest competitor CVS Caremark has significantly benefited from the fallout last quarter gaining millions of new prescriptions as Express members looked for non-Walgreen pharmacies to fill their prescriptions, and ended up on CVS stores as the most convenient alternative. As a result, CVS raised its full year guidance, and it has now turned more aggressive in a bid to retain these new customers hoping that the more time that Walgreen takes in renegotiating with Express Scripts, the stickier these new customers might become as they continue to frequent CVS drugstores and develop a relationship with its pharmacists.

CVS Caremark’s PBM segment also posted impressive growth last quarter, posting 32% revenue growth (y/y) as it processed 17% more mail choice and 26% more pharmacy network claims compared to the prior year period. It benefited from its leading market share in the Medicare Part D prescription business post UAM acquisition, as well as achieved high growth in specialty pharmacy segment and Maintenance Choice program.

Rite Aid, the third largest drug retailer in the U.S., announced its April sales with its same store sales continuing to climb and thinning losses. Its same-store sales have consistently improved for the past five quarters. The company has also refinanced more debt due in 2015 though a bond sale with extended maturities of 2020, similar to its February refinance, leading the stock to a 5% jump on Thursday. The recent refinancing activity and the stabilization in operating trends has also led Fitch to revise its outlook for the company to stable from negative. Read more here.

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