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CVS' Ryan puts cap on slam dunk year.

WOONSOCKET, R.I. -- CVS Corp. has just enjoyed the best year in its history--posting record sales ($30.59 billion) and earnings ($959.3 million) and presiding over an acquisition (some 1,200 Eckerd drug stores) that is already being viewed as a case study in how to assimilate, integrate and digest a chain drug merger.

So it was that the erstwhile Consumer Value Stores convened its annual meeting here last month amid an atmosphere that can most accurately be described as combining quiet confidence and justifiable pride. So it was too that Tom Ryan, the retailer's chairman, president and chief executive officer, an executive who manages to exude confidence in even the most trying of times, presided over the meeting with that combination of personal warmth and easy assurance that has become his hallmark--while transforming this onetime CVS pharmacist into the chain drug industry's most compelling personality. And indeed, on this occasion he had much reason to be confident.

Calling this most brilliant of fiscal years "excellent," Ryan, in a presentation that ran less than an hour, hit just some of the high notes. He spoke of the fiscal year that ended on January I as "one of the pivotal years in the company's history."

While noting that CVS had added 1,100 drug stores over the past three years, he pointed out that, while acquiring and assimilating the Eckerd stores, the retailer was nonetheless able to open 225 new stores of its own last year. He spoke at length of the Eckerd integration, lauding the efficiency with which the 1,200 stores have been absorbed; applauding the systems, training, operations and merchandising teams responsible; and emphasizing that the skillfulness with which the integration has been accomplished "cannot be overstated."

Moving on to another subject that Ryan clearly believes is important to CVS going forward, he praised his company's progress in the area of employee diversification, a priority for a drug chain that was once accurately viewed as a white male enclave and now is arguably the most ethnically and sexually diverse in America.

Then there were the numbers. Though CVS' CEO didn't spend an inordinate amount of time dwelling on the statistics of a performance that spoke for itself, he did note that 70% of the retailer's sales last year came from its pharmacies, that the company now commands a 13.8% share of retail prescription drug sales in America, that CVS dispenses one of every five prescriptions filled at retail in the company's markets, and that it enjoys the lowest pharmacy expense ratio in retailing.

As for other subjects, Ryan spoke of the agreement CVS recently signed with MinuteClinic, the acute in-store medical clinic operator, under which the health care provider will initially open clinics in three CVS drug stores this month and expand beyond that number to a figure industry observers say may ultimately reach and pass 100. He noted that MinuteClinic has a "99% success rating" in treating patients. In providing some indication of the types of services the clinics will offer, Ryan specifically mentioned the treatment of such minor medical problems as sore throats, simple tests for cholesterol, glucose screenings, and vaccinations against such diseases as tetanus and typhus.

The CVS CEO spoke of the success of the retailer's house and proprietary brands, which now combine for 12% of its health and beauty aids sales. Ryan allowed that he was especially pleased with the performance of Nuprin, the brand the company acquired last year from Bristol-Myers Squibb Co.; Preventin AT, the newly launched wrinkle therapy; and the Lumene cosmetics and skin care brand the retailer imports from Finland. As well, he praised CVS' efforts in converting to digital photography, announcing that the chain does more digital photography business than any United States retailer.

Ryan did not miss the opportunity to mention ExtraCare, the retailer's loyalty program, noting that CVS has issued some 15 million ExtraCare cards and reiterating his belief that the program stands alone among chain drug loyalty programs.

Finally, he spoke of CVS' pharmacy benefits management, mail-order and specialty pharmacy businesses, grouped under the PharmaCare umbrella --businesses which, according to Ryan, now cover 30 million lives and generate $2 billion in revenue. Summing up the retailer's prescription drug efforts, Ryan noted that CVS is clearly No. 1 among pharmacy providers when its retail, PBM, mail-service and specialty pharmacy units are totaled.

CVS' CEO said little about going forward, noting that the company will finish assimilating the Eckerd acquisition while adding 250 to 300 new stores this year, and will, by 2006, be responsible for 40 million people through its various pharmacy programs. In truth, there was little more he need have said. Simply put, CVS' remarkable performance in the just-ended fiscal year spoke for itself.
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Title Annotation:CVS Corp. acquisition
Author:Pinto, David
Publication:Chain Drug Review
Date:Jun 6, 2005
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