Even as the COVID-19 outbreak has chilled consumer spending in the U.S., it’s proving to be a boon for CVS Health, with coronavirus testing helping to buoy the drugstore chain’s soft retail business.
CVS Health said on Wednesday, when it raised its profit forecast for the current fiscal year, that it had administered approximately 2 million COVID-19 tests as of the end of July. And some 40% of people being tested at a CVS pharmacy were new customers. What’s more, most tests were scheduled via the CVS app and websites, likely spurring adoption of such tech tools, which are typically “sticky” and help turn users into loyal customers.
The company has also set up some 1,800 drive-thru testing sites and launched a new business-to-business testing program for corporations and colleges. So far, CVS has lined up 40 clients for its B2B offering and says it sees potential to grow that number to 1,000 or more.
“Those of you who have been following us for some time know that CVS Health is much more than just your corner drugstore,” CVS CEO Larry Merlo told analysts on a conference call. “And in this era of COVID, our strategy of diverse assets across health care, this triad of care where connections are delivered in the community and home and in the palm of your hand could not be more important.”
The company’s expansion of its COVID testing services comes at a time when there are widespread complaints about the length of time it takes to get tests results in the United States—a state of affairs that weakens the country’s ability to contain the epidemic. According to CVS’s website, the company’s lab partners are taking six to 10 days to process test results, and in some cases “even longer.”
The opportunity to bring in new customers through its testing programs is an important one for CVS: The company reported a 4.6% decline in sales of nonprescription drugs online and in-store during its most recent quarter, a dismal showing considering that it was deemed an essential retailer. The numbers suggest that CVS customers continue to prefer using the drive-thru to pick up prescriptions rather than go into the store, and that they are choosing stores like Amazon, Walmart, and Target over CVS, in part because of those retailers’ strength in e-commerce.
While CVS has pivoted to health insurance and pharmacy benefits management in recent years, it still operates more than 10,000 stores, meaning retail cannot be an afterthought. The company’s stores are “uninteresting, uninspiring and do not help lift customers during a time of difficulty,” Neil Saunders, managing director of GlobalData Retail wrote in a research note.
Other parts of CVS’s business fared much better: The profits of its health benefits management business soared as people put off elective procedures and other medical care because of the pandemic.
Merlo expects flu shots to be big business and indeed, manufacturers will make a record number of vaccines this year. He also said CVS would play a leading role in administering COVID-19 vaccines once they are ready.
“The environment surrounding COVID-19 is accelerating our transformation and it is providing new opportunities,” he said.