CVS Caremark posts higher 1st-quarter profit

By Brad Dorfman

CHICAGO (Reuters) - CVS Caremark Corp (CVS.N: Quote, Profile, Research, Stock Buzz) posted higher quarterly profits in line with analysts' estimates on Thursday, as the addition of Caremark's pharmacy benefits business helped offset the impact of lower-priced generic drugs on drugstore sales.

The company, which operates one of the largest U.S. drugstore chains, also said it saw no evidence that the weak U.S. economy is hurting sales of discretionary items at its stores. There had been some concern that drugstore industry sales would remain weak after a soft Christmas season.

"Consumers are making tough choices on big-ticket purchases, but they aren't yet focused on Snickers bars," Chief Financial Officer David Rickard said during a conference call with analysts.

Rickard also said the company did not see evidence that consumers were breaking their prescription pills into smaller doses or taking other money-saving measures that would indicate an impact from the economy.

First-quarter profit rose to $745 million, or 51 cents a share, from $405.4 million, or 43 cents a share, a year earlier. The results matched the analysts' average forecast, according to Reuters Estimates.

Quarterly net revenue rose to $21.3 billion from $13.2 billion.

CVS bought Caremark in March 2007, allowing it to increase its prescription benefits business and mail-order operations. CVS and rival Walgreen Co (WAG.N: Quote, Profile, Research, Stock Buzz) had been expanding beyond the traditional drugstore industry to get a larger part of the then-growing U.S. health-care market.

Sales at drugstores open at least a year rose 3.9 percent. Prescription sales increased 3.7 percent. Increased sales of lower-priced generic drugs cut that percentage increase by 4.5 percent, the company said. But while generic drugs cost less for drugstores and consumers, they are more profitable for drugstores.