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Shoppers Drug Mart gains in 1Q; new chairman named
April 27th, 2011
TORONTO – Robust front-end sales growth helped lift first-quarter revenue at Shoppers Drug Mart Corp. despite a dip in pharmacy business. Also, the Canadian drug store chain has named a new chairman and announced changes in its board of directors.
Shoppers Drug Mart said Wednesday that for the 12-week first quarter ended March 26, total sales were nearly $2.35 billion (Canadian), up 2.7% versus a year earlier. Same-store sales rose 2% during the quarter.
In the front end, revenue climbed 6% year over year to almost $1.2 billion in the first quarter, and same-store sales were up 4.4%. The retailer said effective marketing campaigns and promotions along with solid program execution at the store level fueled sales growth and market share gains in its core health, beauty and convenience categories.
Prescription sales, meanwhile, decreased 0.4% to $1.15 billion in the quarter, with pharmacy same-store results down by the same percentage. Shoppers Drug Mart said continued growth in the number of prescriptions filled was offset by a reduction in average prescription value, which the drug chain noted stems largely from a reduction in generic drug reimbursement resulting from health care reform initiatives in Canada, combined with rising generic utilization rates.
Total prescription counts rose 3.9% in the first quarter and were up 3.7% on a same-store basis. Generics represented 56.6% of prescriptions dispensed versus 53.2% a year ago. In the first quarter of 2011, prescription sales accounted for 49% of the chain's sales mix compared with 50.6% in the prior-year period.
On the earnings side, first-quarter 2011 net income was $118 million, or 54 cents per diluted share, compared with $114 million, or 52 cents per diluted share, a year earlier. The earnings-per-share result for the quarter was in line with financial analysts' consensus forecast of 54 cents per share.
Shoppers Drug Mart noted that a strong front-end performance in the first quarter partially offect the downward pressure on sales and margin dollars in the pharmacy from drug system reform initiatives. Also, the company said, benefits from gains in productivity and efficiency were partially offset by increased amortization and higher operating expenses at store level related to store network growth and expansion initiatives, as well as by continued investments in pricing and promotions.
"We are pleased with our performance in the first quarter of 2011," David Williams, interim chief executive officer and board director at Shoppers Drug Mart, said in a statement. "This is a particularly solid result considering that we are in the midst of working through a difficult period of transition as we adjust our business and service model in response to government reform initiatives and the resultant funding and reimbursement pressures on our pharmacy business.
"Together with our associate-owners and their teams at the store level, we remain well-positioned to meet the challenges and capitalize on the opportunities ahead of us without ever compromising on our commitment to excellence in patient care and customer service," Williams added.
Shoppers Drug Mart said that during the first quarter it opened or acquired 18 drug stores (including 11 relocations), closed three smaller drug stores and completed four major store expansions. In addition, 12 drug stores were converted to smaller prototype formats.
At the end of the quarter, the retailer had 1,316 stores overall, including 1,245 drug stores (1,185 Shoppers Drug Mart/Pharmaprix stores and 60 Shoppers Simply Pharmacy/Pharmaprix Simplement Santé stores), 63 Shoppers Home Health Care stores and eight Murale stores.
The company also said Holger Kluge has been named to succeed Williams as the nonexecutive chairman of the board. Kluge, an independent director who joined the board in February 2006, has served as chair of the audit committee since May 2006.
Williams, an independent director who joined the board in September 2003 and has served as the nonexecutive chair since February 2007, will continue to serve as a director and has been appointed to the nominating and governance committee.
Changes in the roles of several board members also were announced. M. Shân Atkins has been appointed chair of the Audit Committee, David Peterson has been named to the Audit Committee, Krystyna Hoeg has been selected as chair of the Nominating and Governance Committee, and Gaëtan Lussier has been appointed to the Nominating and Governance Committee.
All of the board changes are effective May 1, according to Shoppers Drug Mart.
"It is an honor and a privilege to be selected as David Williams' successor as chair of the board of Shoppers Drug Mart Corp.," Kluge stated. "I would like to thank Dave for his value-driven leadership, effective governance and many contributions to the continued growth and success of the company while he served as chair. I am delighted that Dave will continue to serve the company and its shareholders as interim president and CEO until a successor has been appointed and as a director and a member of the Nominating and Governance Committee."
Williams was named interim CEO in late January when Shoppers Drug Mart announced that Jürgen Schreiber, who had served as chief executive since March 2007, planned to resign effective Feb. 15.