WOONSOCKET, RI-Healthy sales growth and improved gross margins, driven by a rise in generic drug sales, sent fourth quarter profits up nearly 3% at CVS Corp., helping to offset charges from the chain’s acquisition of 701 Sav-on and Osco stores earlier in the year, the company says.

“2006 was certainly an outstanding year for CVS,” Tom Ryan, chairman, president, and CEO of CVS says in a conference call announcing the quarterly and year-end results. “We fired on all cylinders, delivering sales, margin, earnings, and free cash flow ahead of our plan.”

The firm, which opened 147 new stores during the year, saw income rise to $417.2 million, or 49 cents a share, during the quarter, up 2.7% from a year earlier when income was $406.4 million, or 48 cents a share. Overall quarterly sales increased 24% to a record $12.1 billion, aided by the June acquisition of Sav-On and Osco stores from Albertson’s Inc. and the sales turnaround at Eckerd stores acquired in 2004.

At comparative stores, sales for the 13-week period ended Dec. 31, 2005 were up 8.7%, while pharmacy sales rose 10.2% and front-end sales increased 5.5%. Those figures exclude the recent Sav-on and Osco acquisitions, the company says.

In September, the firm completed the acquisition of Minute Clinic, a retail based health clinic, and more than doubled the 83 Minute Clinic locations to 155 across 19 states. Ryan says CVS expects to open about 300 Minute Clinics in 2007 and plans to expand the clinics to 2,500 CVS stores in the future.

CVS also plans to buy Tennessee-based Caremark Rx Inc. for $21 billion by the end of this month in an acquisition that would put the firm among the top 20 companies on the Fortune 500.The pharmacy firm, which operates 6,202 retail and specialty pharmacy stores in 43 states and the District of Columbia, predicts the merger will bring in $800 million to $1 billion in additional sales and reduce expenses by $500 million.

For the full year ended Dec. 30, 2006, sales were up 18.4% to a record $43.8 billion compared to the $37 billion in sales during 2005. Sales at comparatives stores increased 8.2% for the year. Comparative pharmacy sales for the year were up 9.1% while front-end same store sales were up 6.2%.

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