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CVS’ Q4 driven by same-store sales, Maintenance Choice

BY Antoinette Alexander

WOONSOCKET, R.I. — CVS Caremark announced on Thursday an increase in fourth-quarter same-store sales and a boost in retail pharmacy revenues as pharmacy comparable-store sales benefited from the Maintenance Choice program.

"I’m pleased with our earnings this quarter, which were in line with our expectations. Our retail business continued to produce industry-leading same-store sales and achieved an all-time record operating margin," stated Larry Merlo, who currently serves as president and COO and will be taking the reins as CEO in March.

"The [pharmacy benefit management] business made significant progress last year, with a strong 2011 selling season, high client-retention rates and the introduction of unique products and services that leverage our combined retail and PBM assets," Merlo added.

Retail pharmacy segment revenues for the three-month period ended Dec. 31, 2010, rose 3.1% to $14.9 billion, compared with the prior year’s period. Same-store sales increased 1.7% as front-end same-store sales increased by 1% and pharmacy same-store sales increased 2%, reflecting a positive impact from Maintenance Choice of roughly 220 basis points on a net basis.

The PBM segment posted a 9.7% decrease in revenues to $12.2 billion for the quarter compared with the prior year’s period. Adjusting for the impact of new generics, net revenues would have declined by 2.4% in the segment. The decrease in net revenues primarily was due to the previously announced termination of a few large client contracts, effective Jan. 1, 2010, as well as the decrease of covered lives under the PBM’s Medicare Part D program resulting from the 2010 Medicare Part D competitive bidding process.

Net revenues for the quarter decreased 4.1% to $24.8 billion. Net income totaled $1.03 billion compared with $1.05 billion in the year-ago period.

For 2011, the company expected to generate free cash flow of $4 billion to $4.2 billion, up from $3.3 billion in free cash flow generated in 2010.

Adjusted diluted earnings per share from continuing operations are expected to be between $2.72 and $2.82 for 2011.

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Target hopes PFresh, savings program will drive sales

BY Allison Cerra

MINNEAPOLIS — Target said that although its comparable-store sales were below expectations in the South and Northeast, the company believes overall sales will be driven by two of its recent initiatives.

Target chairman, president and CEO, Gregg Steinhafel, said that while the company "expects the economy to remain challenging, Target’s PFresh remodel program and REDcard Rewards 5% savings program continue to operate in line with expectations."

Net retail sales for Target totaled nearly $4.4 billion, a 3.3% rise from the year-ago period. Meanwhile, January comparable-store sales increased 1.7%. The retailer added that year-to-date sales totaled about $65.8 billion, up 3.7%.

The earnings release shortly followed the company’s announcement to extend its retail operations to Canada, which will be led by Tony Fisher, former Target VP merchandise operations.

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BJ’s Wholesale placed on sales block

BY Michael Johnsen

WESTBOROUGH, Mass. — After months of speculation, BJ’s Wholesale Club early Thursday morning confirmed the company has decided to explore and evaluate strategic alternatives. Coupled with that announcement was a positive sales story for the year.

BJ’s stock was up by more than $5 to $48.66 in early morning trading on Thursday. Over the last year, the company’s shares have risen about 30%, fueled in part by takeover speculation. Rumors that BJ’s may be a takeover target have circulated since the summer, when Leonard Green & Partners bought a 9.5% stake.

An independent committee of BJ’s has engaged Morgan Stanley as its financial adviser to assist in this process.

BJ’s also reported positive January sales results despite the number of cold-weather storms that recently have swept the country. Sales were up 6.5% to $779.8 million. Comparable sales also were up 2.7%, including a contribution from sales of gasoline of 2.4%.

Excluding the impact of gasoline, merchandise comparable-club sales increased by approximately 0.3%. Severe snowstorms affecting the Northeast and mid-Atlantic regions had a negative impact on merchandise comparable-club sales of approximately 2.5%, the club retailer estimated.

Total sales for the wholesaler were up 8.3% to $10.6 billion for the year ended Jan. 29, with comparable sales up by 4.4%, including a contribution from sales of gasoline of 2%. Excluding gasoline, merchandise comparable-club sales increased 2.4%. BJ’s operates 189 warehouse clubs in 15 states.

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