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CVS Caremark enjoys solid Q1

BY Antoinette Alexander

WOONSOCKET, R.I. CVS Caremark on Thursday posted solid first-quarter results with double-digit gains in net revenues and earnings.

Net earnings for the quarter ended March 29 rose 83.1 percent to $748.5 million, or 51 cents per share, compared with net earnings of $408.9 million, or 43 cents per share, in the year-ago period.

Net revenues for the quarter increased $8.1 billion to $21.3 billion, up from $13.2 billion in the year-ago period. Same-store sales increased 3.9 percent. Pharmacy same-store sales increased 3.7 percent, while front-end same-store sales rose 4.3 percent. Same-store sales benefited from an earlier Easter, which shifted more holiday sales into March. The company estimates the Easter shift had a positive impact of about 115 basis points on front-end same-store sales during the quarter.

“Sales were generally in line with expectations with CVS a bit weaker and Caremark somewhat stronger,” stated Goldman Sachs analyst John Heinbockel in a research note. “On the EBIT line, we estimate merger synergies and then attempt to allocate them between CVS and Caremark, usually about 50/50. For the first quarter, we estimate net synergies (after $10 million of integration costs) of $140 million, reducing reporting EBIT amounts by $70 million each.”

As of March 29, the company operated 6,267 retail pharmacy stores, 56 specialty pharmacy stores, 19 specialty mail order pharmacies and seven mail order pharmacies in 44 states and the District of Columbia.

“I’m very pleased with our results for the quarter. We delivered strong revenue and margin growth across our business that led to earnings at the high end of our expectations. I’m most excited about the substantial progress we have made on our new integrated PBM/retail model, which is resonating strongly in the marketplace,” stated Tom Ryan, chairman, president and chief executive officer.

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Duane Reade announces total sales increase for Q1

BY Antoinette Alexander

NEW YORK Duane Reade announced on Tuesday that it narrowed its first quarter net loss as total sales rose 3.1 percent to $427.1 million as new chairman and chief executive John Lederer expressed optimism in Duane Reade’s potential.

Filling the top spot vacated by Rick Dreiling in late January, Lederer, from 2001 to 2006, served as president of the Canadian supermarket chain with more than 1,000 corporate and franchise stores under various operating banners. During his 30-year career at Loblaw and its subsidiary companies, Lederer has held a number of senior positions throughout the organization, including executive vice president responsible for merchandising, operations and profit performance of all Loblaw businesses in eastern Canada.

In a conference call with analysts to discuss its first quarter results, Lederer said he has spent his time absorbing and learning more about the company by visiting stores to talk with customers and employees.

He said the changes that have taken place within the Duane Reade under the direction of Dreiling are tangible and sustainable and there is a strong foundation on which to build.

That is not to say that challenges do not exist. Lederer told analysts that the business has and will continue to evolve and the shifts in management undoubtedly add some uncertainty. In addition, the company may face such headwinds as the macro economic conditions creating challenges for many retailers. However, he stressed that business will continue as usual so the stride will not be broken. Lederer said he wants the transition to be seamless and wants to maximize Duane Reade’s potential.

Looking ahead, the company will develop additional initiatives to elevate the brand and the business but Lederer did not discuss details.

Total sales rose 3.1 percent to $427.1 million from $414.4 million in the year-ago period. Same-store sales rose 4.5 percent, while front-end same-store sales rose 7 percent. Pharmacy same-store sales increased 1.5 percent.

Front-end sales, which benefited from the earlier timing of the East holiday by 0.5 percent, were driven by strong sales of food and beverage categories, OTC products, and health and beauty care items.

Net loss for the quarter totaled $21 million compared with $30.5 million in the prior year. The operating loss was $4.1 million compared with $14.9 million in the year-ago period.

For 2008, the company reaffirmed its guidance of adjusted FIFO EBITDA in the range of $90 million to $95 million driven by net retail store sales, excluding pharmacy resale activity, in the range of $1.72 billion to $1.736 billion. Total same-store sales are expected to grow between 3.3 percent to 4.3 percent.

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Proffer leaves Longs

BY Doug Desjardins

WALNUT CREEK, Calif. Longs Drug Stores director of investor relations Phyllis Proffer left the company earlier this month, a company spokesman confirmed.

No reason was given for Proffer’s departure and Longs is currently looking for someone to fill the position. Proffer had been with Longs since August 2003 when she joined as director of investor relations and public relations.

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