Widespread sales weakness in November spread to two major drugstore chains, with
reporting weaker-than-expected results and rival
posting an unexpected decline.
CVS said same-store sales, or those at stores open at least a year, rose 3.1% for the month over the year-ago period, short of Wall Street's estimates that called for a jump of around 5%. Pharmacy same-store sales increased 4%, while front-end same-store sales increased 1.2%. Pharmacy sales made up 71.3% of total company sales.
The company said total sales were up 27% to $2.07 billion, thanks to the acquisition of 1,268 Eckerd drugstores, as well as Eckerd's pharmacy benefit management and mail-order pharmacy business, over the summer.
With Halloween weekend falling in October this year, unlike last year when it was included in November, CVS estimated that 160 basis points were shaved off its front-end, same-store sales measure. This was partially offset by the Thanksgiving holiday falling in the November period this year, rather than December, but pharmacy sales were hurt over Thanksgiving by reduced store hours.
Meanwhile, Rite Aid said its same-store sales ticked down 1.3% because of the United Auto Workers mandatory mail prescription program and tougher year-over-year comparisons. Analysts were expecting a modest gain. Its comparable pharmacy sales were down 1%, while front-end sales were down 1.9%.
Rite Aid's total sales declined 1.6% to $1.56 billion compared with $1.59 billion in November of last year. Prescription revenue accounted for 64% of sales, and third-party prescription revenue represented 93.5% of pharmacy sales.
On the basis of the disappointing results, the company warned that it may have to lower its guidance for sales and earnings for 2005. In its September forecast, management was forecasting sales to be between $16.9 billion and $17 billion, with comps improving 2.75% to 3.25%. Net income was expected to be between $122 million and $150 million for the year, or between 16 and 22 cents a share.
For its third quarter, the company said same-store sales were up 0.2%, while total sales were down 0.05% to $4.089 billion from last year's $4.091 billion.
Rite Aid will announce third-quarter earnings results before the market opens on Dec. 16.