CVS Health focuses on digital to improve pharmacy, front-end experience

WOONSOCKET, R.I. — Across the front-end, CVS Health is in the midst of enhancing its digital capabilities, Helena Foulkes, EVP CVS Health and president CVS/pharmacy, told analysts Tuesday morning during the company's third-quarter conference call. In addition, the company provided insight into the impact of its exit from the tobacco business during the call.

 

CVS Health is focused on its omnichannel experience with their core pharmacy customers. "We're thinking very holistically from the customer's perspective just in terms of the experience and how we want to use our assets," Foulkes told analysts. "When the customer thinks about CVS, she's thinking first and foremost about pharmacy, and health and beauty is a really important part of that," she said. "We're spending a lot more time ... thinking about the connection between stores and digital and really enhancing the experience for our customers around digital. I'm excited about the work we've got going on there. It's again focused on the pharmacy, but the front store is an important part of that as well." 

 

Regarding CVS Health's decision to no longer sell tobacco products, there is one thing that decision is not doing. It's not hurting their pharmacy business. "As expected, we have seen no discernable impact on our pharmacy business," Larry Merlo, CVS Health president and CEO said. 

 

Quite to the contrary, CVS Health's pharmacy and health-and-wellness segments are performing well. 

 

"Continuing the strong trend that we saw in the second quarter, we once again gained pharmacy share in Q3," he said. Year-over-year our pharmacy marketshare increased about 40 basis points on a 30 day equivalent basis. Pharmacy same-store sales increased 4.8% vs. the same quarter last year, while pharmacy same-store scripts increased 5.1%, again on a 30 day equivalent basis." That growth includes a collective 380 basis point negative impact from recent generic introductions and the implementation of Specialty Connect, Merlo said, which transfers specialty prescriptions from CVS' retail segment to its PBM segment. 

 

And though the tobacco exit has contributed to a decline of 4.5% in front-end comparable sales, CVS Health's front-end is on an upward trajectory. Adjusting for the tobacco impact, comps would have been approximately 480 basis points higher. CVS Health's front-end margins are up, Merlo noted, and less than one-third can be attributed to the absence of low-margin tobacco products. That means two-thirds of the improvement are attributal to responsible promotional investments and driving store brand. 

 

Speaking of which, CVS' store brand penetration is up 210 basis points to 20.1% of front-store sales, with only half of the improvement related to the tobacco exit (CVS carried no private label tobacco products).