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The power of one rings loud and clear at CVS Caremark’s 2013 Analyst Day

BY Antoinette Alexander

Top CVS Caremark executives gathered in New York City on Wednesday for its 2013 Analyst Day to outline the company’s strategies to drive long-term enterprise growth through its vast pool of assets and its nimbleness in responding to the evolving healthcare landscape.

It marked the third year that the Woonsocket, R.I.-based company has hosted its Analyst Day meeting in December, but this year’s event no doubt proved especially timely since we’re just days away from the start of the New Year when health reform will begin to significantly alter U.S. health care.

CVS Caremark has long stressed the importance and uniqueness of its integrated business model but that message has perhaps never been louder or as clear prior to Wednesday’s meeting. For CVS Caremark it isn’t about driving just pharmacy sales or front-end sales or bolstering revenues of its PBM business. It is about all of the above — and then some. It is about driving enterprise growth and capitalizing on the opportunities created by the evolving healthcare landscape to help improve health outcomes and lower costs.

Whether it was Helena Foulkes, incoming president of CVS/pharmacy, discussing its retail operations or Andy Sussman, SVP and associate chief medical offering and president of MinuteClinic, speaking on the MinuteClinic business, it all tied back to driving enterprise growth and leveraging the opportunities created by the evolving marketplace. In other words, the power of one.

“I get incredibly excited about the opportunities the changing health care landscape creates for us. We’ve given a lot of thought to how we can capitalize on these changes to grow our business,” Foulkes told analysts. “First, as Larry [Merlo] mentioned, there’s what we’re calling the retailization of health care. We know that consumers are looking for health, navigating the complexities and the confusion of the health care system.”

There’s no denying that the company’s vast enterprise — comprised of 7,600 retail locations, the PBM and about 800 MinuteClinic locations — creates a sustainable competitive advantage for the company.

“We’re focused on enhancing access, lowering costs and improving health outcomes and our consumer driven, channel-agnostic solutions are creating real value for patients, customers and clients. 
And this is how we’ll continue to win share in the marketplace,” Merlo told analysts.

 

 

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Rite Aid’s latest programs show an eye on the future

BY Alaric DeArment

Rite Aid announced its third-quarter 2014 sales Thursday, showing higher total and same-store sales and profits than third quarter 2013, as well as continued growth in programs like the Wellness store format, Wellness65+ and others.

The main story surrounding Rite Aid over the past couple of years has been its efforts to engineer a turnaround, but the message from Thursday was, "Rite Aid more or less has turned around, so what’s next?"

The chain’s stock was trading at $5.18 per share in late-afternoon trading on the New York Stock Exchange Thursday, down from $5.43 at the start of the day after it issued a lower earnings-per-share and narrower adjusted EBITDA guidance for fiscal year 2014, attributing the lower expectations to reimbursement rate and generic pricing pressure, as well as a promotional selling environment on the front end. Much of Thursday’s media coverage of Rite Aid following the release of its earnings focused on this aspect, but these are largely industry-wide problems, not a reflection of Rite Aid’s health as a company.

The 4,595-store chain’s programs are continuing to show promise: Wellness stores, which now account for nearly a quarter of all its stores, are showing noticeably better performance on the front-end and in the pharmacy; the company is investing heavily in initiatives designed to benefit the front-end, including pilot programs like Beauty Vision and a merchandising initiative centered on health products; in addition to its earnings, Rite Aid also announced Thursday an extension of its long-standing partnership with GNC, with president and COO Ken Martindale noting that it would focus much more closely on that partnership than it had before due to having been distracted by its turnaround program.

Much of Rite Aid’s same-store sales growth as of late has come from the pharmacy, but as the numbers from the Wellness stores show, improving the look and feel of its stores can help benefit the front-end as well, and innovative programs like these will probably help drive sales as well; it’s worth noting that early on, one of the stores with a Beauty Vision section had already seen a lift in cosmetics sales.

But there’s a lot to crow about on the financial side too. TheStreet gave Rite Aid’s stock a "Hold" rating, noting a mixture of strengths and weaknesses, one weakness being a gross profit margin of 30.14% that the financial information company called "lower than what is desirable," and a net profit margin of 0.52% that’s behind the industry average. But here’s the good news: Its sales growth has "slightly outpaced" the industry average of 6.3%; the company has seen earnings growth of 160% over the past year, while its stock price has increased by 427.35%, outpacing the rise in the Standard & Poor’s 5000 Index during the same period; and its net operating cash flow has grown by 341.63%, at a time when the industry, on average, has seen it decline by 54.43%.

Notwithstanding the pressures that the industry has been feeling and will continue to feel in the near future, let alone the vagaries of the stock market, Rite Aid’s programs are already panning out, and that’s what really matters in the long run.

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Report: Centrella cooperative considering purchase of 10 Dominick’s stores

BY Michael Johnsen

CHICAGO — The purchase of as many as 10 Dominick’s stores may be under consideration by independent grocery chains affiliated with the Centrella cooperative, Crain’s Chicago Business reported Thursday, citing sources close to the deal. 

Safeway announced in October its intended exit from the Chicago market altogether, where it at one time operated 72 Dominick’s stores, by early 2014. Now approximately 55 remain. 

Four stores were sold to New Albertsons in October. In early December, Safeway announced it had reached a definitive agreement to sell 11 of its Dominick’s stores in the Chicago metropolitan area in a cash and lease assumption transaction to Roundy’s. Roundy’s will take possession of the stores during a transition period that will take place over the next two months. And at least two Dominick’s stores have expiring leases, according to the Crain report. 

 

 

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