CVS Caremark CEO Thomas Ryan to retire next year, Larry Merlo named successor

CVS Caremark taps Merlo as CEO starting in 2011

NEW YORK — CVS Caremark Corp. said Wednesday Chairman and CEO Thomas M. Ryan will retire next year, and its board has picked retail executive Larry J. Merlo to succeed him.

The Woonsocket, R.I., drugstore chain said Ryan plans to step down in May 2011. The board appointed Merlo, 54, president and chief operating officer and anticipates he will replace Ryan as CEO. He has been in charge of CVS’s retail operations since March 1998.

Merlo also will be elected to the company’s board. He has worked at CVS for 20 years.

Ryan, 58, has been with CVS for 36 years, including 16 years as president. He said in a statement from the company their plan provides for a “smooth, seamless transition in the leadership of CVS Caremark,” and he felt it was the right time to move forward with it.

Ryan’s tenure is likely to be defined by the merger of CVS and Caremark, which was completed in March 2007. The $26.5 billion deal combined one of the largest drugstore chains in the country with one of the biggest pharmacy benefits managers. The combination was designed to help health plan members save money on prescription drugs — the company believes its size helps it in price negotiations — while bringing more business to the drugstores.

The company has expanded rapidly in recent years with the help of several major retail acquisitions. CVS bought 1,260 Eckerd drugstores in 2004, acquired 700 Osco and Sav-On stores and retail clinic operator MinuteClinic in 2006, and purchased Longs Drugs Stores and its 500 locations in 2009.

The Eckerd deal expanded CVS’s business in the South, while the Osco deal broadened its reach in the Midwest and Southern California. By buying Longs, it gained locations on the West Coast, including Central and Northern California. About 500 of its stores have walk-in MinuteClinics.

CVS now runs 7,063 drugstores nationwide, about 400 hundred fewer than rival Walgreen Co. It is the second-largest drugstore chain in terms of stores, and the third-largest pharmacy benefits manager by revenue.

The company has formed an office of the chairman to help with the transition. It includes Ryan, Merlo and Per Lofberg, president of the company’s pharmacy benefit management business, Caremark Pharmacy Services

Merlo will remain president of the retail business until the company finds a replacement. CVS said it will consider internal and external candidates.

Last week, CVS Caremark said its first-quarter profit rose 4.5 percent, but a mild cold and flu season hurt sales. The company earned $771 million, or 55 cents per share, on $23.76 billion in revenue.

The company also raised the low end of its 2010 earnings guidance and now expects an adjusted profit of $2.77 to $2.84 per share, up from a previous range of $2.74 to $2.84 per share.

CVS stock rose 57 cents, or 1.6 percent, to close at $36.32.

AP Business Writer Tom Murphy in Indianapolis contributed to this report.