Investors Adjusting to Larger CVS

While its shares didn't move much on the news, yesterday's monthly sales report out of newly enlarged drugstore retailer CVS (NYSE:CVS) was nevertheless worth a look: Total revenues advanced more than 30% to $2.63 billion. Since CVS added nearly 1,300 stores in July following the partial purchase of Eckerd from J.C. Penney (NYSE:JCP) -- it now nears 5,400 -- that makes sense, but its monthly 5.4% same-store sales increase, which doesn't include Eckerd, is also impressive.

Still, the company's shares barely budged on what amounts to normal daily trading volume yesterday. While that's not headline news, it does perhaps underscore the fact that investors are likely going to need some time to get a sense of precisely what the new-look CVS has to offer. We got a glimpse of that earlier this month when Woonsocket, R.I.-based CVS turned in Q3 financial results that included two months of Eckerd numbers.

Revenues jumped 24%, while same-store sales improved 5.2% with the pharmacy business performing better than the front end of the store. Gross margins improved, which should happen after a merger of this type. But costs associated with the merger hurt operating and net margins: In short, operating and net income came in about flat year over year.

Integration is going to take some time and cost some money, and that showed in the results. It may also help explain, to some degree anyway, why key competitor Walgreen's (NYSE:WAG) October "comps" looked even better by comparison. Still, investors have pulled the company's shares steadily upward since the merger closed. (It makes Phil Wohl's Aug. 4 take look pretty good in hindsight!) And with CVS's monthly results indicating strong business trends, their enthusiasm for what lies ahead is understandable.

Fool contributor Dave Marino-Nachison doesn't own any of the companies in this story.