CVS plans free same-day delivery in some cities, next-day delivery nationwide

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% of the U.S. population within three miles of one of its locations.

The nation's second-largest drugstore chain will start offering free, same-day deliveries in December from its sites in Manhattan. It will also expand next-day deliveries nationwide early next year and bring same-day service to several more cities.

Drugstores and other retailers have been pushing more customer-friendly services in recent years in part to counter competitive pressure from Amazon.com 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's a direct threat to the networks of thousands of stores that chains such as CVS built in order to get closer to the customer.

CVS plans to expand same-day deliveries to San Francisco, Boston, Miami, Philadelphia and Washington, D.C., 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.

The company says its free same-day service in Manhattan will be done within hours. It will hire couriers to deliver prescriptions and other products in secure, tamper-proof packaging.

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

CVS Health narrowly beat Wall Street earnings expectations in the quarter. But network exclusions, hurricanes and slumping sales from established stores all led its profit to drop more than 16%, the company said.

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

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 government's Tricare program, which provides coverage for military personnel and their families.

The company also saw another PBM, Prime Therapeutics, enter a retail pharmacy network agreement with Walgreens Boots Alliance Inc., which runs the biggest drugstore chain.

CVS Health said Monday that those exclusions were a key reason for its third-quarter profit drop. The company also took a $55-million hit in the quarter from major hurricanes that slammed the United States.

Overall, CVS Health earnings fell to $1.29 billion from $1.54 billion in the year-earlier quarter. Total revenue climbed more than 3% to $46.18 billion.

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

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

For 2017, CVS now expects annual adjusted earnings of $5.87 to $5.91 per share, a forecast that counts charges due to the hurricanes. That's down from a forecast of $5.83 to $5.93 that it made in August.

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

The Wall Street Journal recently reported that CVS is in talks to buy the nation's third-largest insurer, Aetna Inc. The deal could be worth more than $60 billion, the newspaper reported, citing anonymous sources. CVS Health leaders, like their Aetna counterparts, have declined to discuss what they referred to as market speculation.

Shares of Woonsocket, R.I.-based CVS Health slipped $2.45, to $66.80.


UPDATES:

4 p.m.: This article was updated with CVS’ closing stock price.

This article was first published at 8:35 a.m.

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