We review CVS Health’s fourth quarter performance and its plans to advance its personalisation and digital strategies in the year ahead.
Acquisition of Target’s pharmacies helps to lift revenues
CVS Health’s fourth quarter revenues increased by 11.7% to $46.0bn, helping to lift full year revenues to $177.5bn, an increase of 15.8%, cementing its position as the second largest grocery and drugstore retailer globally. Revenues in the retail/long-term care segment increased by 4.7%, reflecting the acquisition of Target’s pharmacy business. However, same-store sales fell by 0.7%, with front store same store sales down 2.9%. Revenues in the pharmacy services segment increased by 17.9%, driven mainly growth in the pharmacy network and specialty pharmacy claims. Net income increased by 14.0% to $1.7bn.
Targeting promotional spend through personalisation strategies
The decline in front store same store sales was mainly due to softer customer traffic and efforts to rationalise its promotional strategies. The business, which accounts for around 11% of the company’s total revenues, is focusing its efforts on implementing its personalisation strategies. These will allow it to invest its promotional spend in a more targeted way, enhancing its margins. This year the retailer has started to further reduce its mass promotions to better serve its loyal customers and drive profitable sales in this part of the business.
Digital programs central to its future strategy
Going forward CVS Health will continue to focus on growing its beauty, healthcare and personal care businesses and developing its digital capabilities to create an integrated health and pharmacy experience. As part of its digital program, CVS Curbside has been launched in around 4,000 stores, providing shoppers with a convenient pick-up solution. The retailer has also introduced CVS Pay, providing customers with a faster checkout experience.
This year CVS Health will enhance its online shopping tool and further integrate personalisation into its digital platforms. It will also continue to remodel stores to improve its health and beauty offer and scale up its healthy food ranges, including its private brands, which now account for almost 24% of front store sales.
| Stewart Samuel, Program Director, IGD Canada|
Based in Canada, Stewart heads up all of IGD's research and coverage on CVS Health. He is also responsible for shaping IGD's research program across North America. Contact Stewart at email@example.com for further insight on the region and its leading retailers.