CVS Reports Loss on Restructuring Charge

Drugstore chain CVS Corp. reported a $130.2 million loss for the fourth quarter, mostly due to a $352.5 million charge related to its restructuring plan.

The Woonsocket-based company said Tuesday its loss amounted to 34 cents per share, for the quarter ended Dec. 29, 2001, compared to earnings of $209.5 million, or 51 cents per diluted share, in the same period in 2000.

Excluding the charge, CVS posted earnings of 24 cents per diluted share. That matched the consensus forecast of analysts surveyed by Thomson Financial/First Call.

Net sales rose 8.4 percent to $6 billion compared to $5.5 billion for the prior year's fourth quarter, while pharmacy same-store sales rose 10.1 percent.

"While 2001 was a challenging year, our fourth-quarter sales trends marked the beginning of improved momentum," chairman, president and chief executive Tom Ryan said in a news release. In a conference call with analysts and reporters, Ryan added, "We've carried our momentum into the new year."

In January, the company reported same-store sales were up 7.9 percent, while pharmacy same-store sales rose 10.3 percent.

Still, Ryan said its cough-and-cold medicine sales were "relatively flat" for the month because the flu this season has not been as severe as prior years. Ryan said statistics from the Centers for Disease Control show the incidents of flu are down 6 percent.

CVS leads Deerfield, Ill.-based rival Walgreens in the number of stores, but Walgreens leads in revenue.

The $352.5 million charge related to its restructuring includes closing 229 stores, closing a mail-order facility in Ohio, a distribution center in North Carolina and staff cuts.

During the quarter, CVS opened 67 new stores, closed 11 and relocated an additional 40 stores. For the year, CVS opened 126 new stores, closed 68 and relocated 122 other stores.

"Our cost and operational streamlining plan, along with a series of sales generation initiatives, will strengthen our long-term prospects," Ryan said. "While 2002 will be a transition year as the benefits of our actions take hold, our plan is designed to generate sustainable earnings growth of 12-15 percent longer term."

For the year, CVS earned $413.2 million, or $1 a share, versus $746 million, or $1.83 a share, for 2000. Revenue rose to $22.24 billion from $20.08 billion a year ago.

In early morning trading on the New York Stock Exchange, CVS shares were at $26.29 per share, down 28 cents or about 1 percent.