Wed, Nov 08, 2017 - Page 10 News List

US drugstore chain offers free, same-day delivery to counter online retailers


CVS Health Corp is cranking up prescription deliveries to customer homes or workplaces as the drugstore chain tries to squeeze more of an edge from a massive store network that puts 70 percent of the US population within 5km of one of its locations.

The US’ second-largest drugstore chain is to start offering free, same-day deliveries next month from its Manhattan sites. It is also to expand next-day deliveries nationwide early next year, while also bringing the same-day service to several more cities.

Drugstores and other retailers have been pushing more customer-friendly services over the past few years, in part to counter competitive pressure from Inc. The online retail giant already offers to its Amazon Prime members in some cities same-day deliveries of consumer goods typically sold in drugstores.

That is a direct threat to the networks of thousands of stores built by chains like CVS in order to get closer to the customer.

CVS plans to expand same-day deliveries to Miami, Boston, Philadelphia, Washington and San Francisco by early next year.

A company spokeswoman said the delivery service would be a faster alternative and have a wider reach than its mail-order business.

CVS runs more than 9,700 retail locations, including pharmacies in Target stores. The company started a curbside pickup service a couple of years ago, and it already offers deliveries from about 1,600 locations.

“We’re pushing the envelope on basically serving the patient wherever she is,” CVS executive vice president Helena Foulkes told Wall Street analysts during a Monday morning conference call to discuss the company’s third-quarter performance.

CVS edged Wall Street earnings expectations in the third quarter, but the company said network exclusions, slumping sales from established stores and hurricanes all helped chop its profit more than 16 percent.

Aside from operating drugstores, CVS also processes more than 1 billion prescriptions annually as a pharmacy benefits manager.

Its business has taken a hit from some key customers that have excluded the company from their pharmacy networks.

Late last year, CVS was removed from the network of the US government’s Tricare program, which provides coverage for military personnel and their families.

The firm also saw another pharmacy benefits manager, Prime Therapeutics, enter a retail pharmacy network agreement with Walgreens Boots Alliance Inc, which runs the US’ biggest drugstore chain.

CVS on Monday said those exclusions were a key reason for its third-quarter profit drop.

The company also took a US$55 million hit in the quarter from major hurricanes that hit the US and Puerto Rico.

Overall, CVS earnings fell to US$1.29 billion, compared with US$1.54 billion in the same period last year. Total revenue climbed more than 3 percent to US$46.18 billion.

Earnings, adjusted for one-time gains and costs, came to US$1.50 per share.

Analysts expected average earnings of US$1.49 per share on US$46.19 billion in revenue, according to Zacks Investment Research.

For this year, CVS now expects annual adjusted earnings of US$5.87 to US$5.91 per share, a forecast that counts charges due to the hurricanes. That is down from a forecast of US$5.83 to US$5.93 that it made in August.

Analysts expect average earnings of US$5.88 per share, according to FactSet.

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