CVS Health Posts Higher Profit -- 2nd Update

By Chelsey Dulaney And Paul Ziobro 

CVS Health Corp. posted higher profits in the latest quarter, as growing sales of prescription drugs offset the impact of a costly decision to stop selling tobacco.

The company's pharmacy services business, which provides health-care benefits to clients, continued its strong growth, processing a higher number of prescription claims during the period. Sales rose 18% to $23.9 billion, with an increase in specialty pharmacy sales as well.

The gain offset sluggish growth of just 1.2% in the chain's retail business, excluding newly opened or closed stores. CVS's move last fall to stop selling tobacco products to emphasize its image as a health-care company hurt sales in the front of its stores, where the company sells everyday products and over- the-counter medication. They fell 6.1% in the quarter.

As part of its shifting identity, CVS is expanding its walk-in clinics and its specialty pharmacy business. The company hopes ending tobacco sales will eventually pay off by having clients reward it with health-related business. But the move has yet to fully pay off in dollars and cents.

"We see some tangible benefits that are more qualitative than quantitative at this point," CVS Chief Executive Larry Merlo said on Friday's earnings call.

The company reported a profit of $1.22 billion for the first three months of the year, up from $1.13 billion a year earlier. Revenue grew 11% to $36.3 billion.

The company's shares were up 1% in midmorning trading at $100.28.

Mr. Merlo also briefly addressed the destruction and closure of several CVS locations in Baltimore earlier this week following the funeral of Freddie Gray, an African-American man who died while in police custody.

"Despite these acts of violence, we remain committed to these urban markets," he said.

Write to Chelsey Dulaney at [e-mail] and Paul Ziobro at [e-mail]

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