CVS Sales Up 11%, Lifted by Covid-19 Demand

“Many like to model Covid going to zero for retail, and that’s a convenient modeling assumption, but I think a very highly unlikely outcome for 2023 as we move from pandemic to endemic,” CVS Chief Financial Officer

Shawn Guertin

said on a call with analysts.

CVS said Wednesday that it administered more than six million Covid-19 tests and over eight million Covid vaccines in the first three months of the year.

Demand for Covid-19 testing surged during the start of the year as the wave of cases driven by the Omicron variant swept through the U.S. The company’s same-store sales, which include stores open at least 12 months plus digital channels, grew by 10.7% in the first quarter from a year earlier, shortly after the first vaccines had been authorized.

CVS expects to administer 18 million vaccines this year, a decline of about 70% from last year; demand for take-home tests will likely fall by 50%, the company said.

Meanwhile, key parts of the business stand to benefit from inflation, Mr. Guertin said.

Higher prices tend to boost revenue and will likely drive up demand for the company’s private-label offerings. The company said it has yet to see costs increase in its pharmacy business and that labor costs are relatively stable because the company raised worker wages last year. CVS’s portfolio, however, took realized capital losses, Mr. Guertin said.

The company logged $76.83 billion in revenue in the period, which included a 9.2% sales increase in the retail segment, as consumers scooped up take-home test kits. At the same time, in-store Covid-19 testing decreased.

The drugstore chain has won over new customers throughout the pandemic and executives expect some of those shoppers to stick around.

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.

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.

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.

CVS has seen its costs rise, in part due to wage increases, over the past year. Total cost of products sold rose to $45.51 billion in the quarter, up from $40.90 billion a year earlier.

In the three months ended March 31, CVS posted a quarterly profit of $2.32 billion, or $1.74 a share, up from $2.22 billion, or $1.68 a share, in the year-ago period.

The company said income related to the 340B drug-discount program was flat compared with last year. The federal program, which mandates discounts on drugs for certain nonprofit hospitals, clinics and other facilities, is the focus of a battle between hospitals and pharmaceutical companies.

Drugmakers are cutting back the flow of 340B-covered medications through pharmacies like CVS that contract with participating entities like hospitals. CVS says it is “estimating basically flat in the program year over year” right now.

The company raised its 2022 earnings outlook slightly, now expecting per-share earnings between $8.20 a share and $8.40 a share, an increase of 10 cents on either end.

—Sharon Terlep and Anna Wilde Mathews contributed to this article.

Write to Will Feuer at [email protected]