CVS Says 4th-Quarter Profit to Miss Forecasts

CVS Corp., the No.2 U.S. drugstore chain, said Tuesday it expects fourth-quarter earnings to fall far short of analysts’ estimates. It plans to close 200 stores, nearly 5% of its 4,100 stores.

The news pushed CVS shares to a four-year low.

The Woonsocket, R.I.-based company, which ranks second behind industry leader Walgreen Co., also said it would cut as many as 400 jobs, or less than 1% of its work force, and take a fourth-quarter restructuring charge of $350 million.

CVS said the restructuring would involve closing 200 stores in January in an effort to drive growth back to former levels. CVS has been expanding rapidly in recent years.

Its plan to close the stores contrasts sharply with that of Walgreen, which plans to open 475 stores through 2002 and operate 6,000 stores by 2010.

CVS, which employs about 110,000, said it also would close one of its 10 distribution centers and shut down a mail-order facility.

The retailer unveiled the restructuring as it reported a 16% drop in third-quarter earnings.

“2001 has been a tough year and nobody is happy about it,” Chief Financial Officer David Rickard said in a conference call with analysts.

Shares of CVS closed down $7.27, or 23%, to $24.35 on the New York Stock Exchange.

CVS said third-quarter earnings were $123.7 million, or 30 cents a diluted share. Year-earlier earnings were $147.2 million, or 36 cents a diluted share, excluding a one-time $19.2-million gain from the settlement of a class-action lawsuit.

The drugstore chain last month lowered its third-quarter earnings forecast to a range of 30 to 32 cents a share from a previous range of 35 to 37 cents, citing a slowdown in customer traffic after the Sept. 11 attacks on the World Trade Center and the Pentagon.

CVS said it expected fourth-quarter earnings of 23 to 28 cents a share, before the restructuring charge of 56 cents. Earnings were 51 cents a share in the year-earlier fourth quarter.

Analysts on average were expecting a profit of 49 cents a share, with estimates ranging from 23 to 51 cents, according to research firm Thomson Financial/First Call.

Third-quarter sales rose 10.1% to $5.4 billion. Sales at stores open at least a year rose 7.6%.