(Adds company comments, analyst comment, details on specialty pharmacy, tobacco exit)
By Nandita Bose and Sruthi Ramakrishnan
May 1 (Reuters) - CVS Health Corp reported higher-than-expected quarterly results on Friday, helped by increased revenue from its specialty pharmacy services and increased claim processing.
General merchandise sales at drugstores open at least a year were down, however. The company blamed its decision in October to stop selling tobacco products.
CVS, the No. 2 U.S. drugstore operator, also raised the low end of its 2015 profit forecast to $5.08 a share from $5.05 before special items, while keeping the high end at 5.19 . Its shares rose 1 percent to $100.24 in morning trading.
One of CVS’s top priorities has been to develop its specialty pharmacy business, which provides medication and services for complex diseases such as multiple sclerosis, hepatitis C and cancer.
Chief Executive Officer Larry Merlo said on a conference call that specialty pharmacy revenue increased in the quarter because of volume, new products, inflation and a prescription services program called Specialty Connect.
Overall pharmacy services revenue rose 18.2 percent to $23.9 billion.
Total net revenue increased 11 percent to $36.33 billion. Analysts on average had expected $35.93 billion, according to Thomson Reuters I/B/E/S.
The number of pharmacy network claims CVS processed increased 11 percent to 230.8 million, with growth from its Medicaid management business and public exchanges.
Same-store sales increased 1.2 percent, double analysts’ expectations of a 0.6 percent rise. On that basis, pharmacy sales increased 4.2 percent, helped by more flu cases, but general merchandise fell 6.1 percent.
The impact of the tobacco exit was around 800 basis points, about 100 basis points less than what the company originally anticipated when it became the first national U.S. drugstore chain to take cigarettes off its shelves.
Stephen Ward, commercial director of research firm Conlumino, said CVS needed to put more effort into boosting its retail sales.
“There are factors wider than just tobacco that are at play,” Ward said. “Areas such as range assortment, visual merchandising and the general shopping experience are all in need of improvement.”
First-quarter net income rose 8.1 percent to $1.22 billion, or $1.07 per share.
Excluding intangible asset amortization related to acquisition activity, CVS earned $1.14 per share. Analysts on average had expected $1.08. (Reporting by Nandita Bose in Chicago and Sruthi Ramakrishnan in Bengaluru; Editing by Maju Samuel, Savio D‘Souza and Lisa Von Ahn)