Revenue and same-store sales increases helped Shoppers Drug Mart Corp. beat financial analysts' earnings forecast by a penny for the first quarter.


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Shoppers Drug Mart gets earnings lift from 1Q sales gains

April 25th, 2013

TORONTO – Revenue and same-store sales increases helped Shoppers Drug Mart Corp. beat financial analysts' earnings forecast by a penny for the first quarter.

Canada's largest drug chain said Thursday that for the 12-week first quarter ended March 23, sales rose 3.8% year over year to $2.49 billion (Canadian). The company attributed the increase to strong volume growth in pharmacy plus sales and market share gains in the front end.

Pharmacy sales in the quarter grew 3.3% to nearly $1.21 billion, fueled by strong growth in prescriptions filled and sales gains in the long-term care and specialty pharmacy business units, partially offset by a further reduction in average prescription value, according to Shoppers Drug Mart.

In the front of the store, revenue climbed 4.3% to almost $1.28 billion in the first quarter, led by robust gains in food and candy, cosmetics and over-the-counter medications, the retailer said.

The company noted that its store network development program, which grew drug store selling space by 3.2% from a year earlier, has helped spur sales growth, especially in the front end.

Same-store sales in the first quarter edged up 2.5%, reflecting increases of 3.3% in the front end and 1.6% in the pharmacy.

Prescription count was up 7.3% overall and 5.4% on a same-store basis during the quarter. Shoppers Drug Mart said pharmacy volume growth was particularly strong in Ontario, driven in part by a program to waive the $2 co-payment on eligible prescriptions for seniors and acquisitions in western Canada that the retailer closed in the second half of last year.

Average prescription value at retail fell 4.8% in the first quarter, mainly due to further reductions in generic drug reimbursement by provincial health system reforms, along with rising generic utilization rates, Shoppers Drug Mart reported. The company said generics comprised 60.7% of prescriptions dispensed in the first quarter versus 57.6% a year earlier. Pharmacy sales accounted for 48.6% of the retailer's sales mix in the quarter, down from 48.8% in the prior-year period.

"We are pleased with our first-quarter results. While the regulatory headwinds facing our industry have yet to subside, we continue to outperform the market," Shoppers Drug Mart president and chief executive officer Domenic Pilla said in a statement. "The collective commitment of our associate-owners and their teams at store level to provide the best in patient care and customer service is delivering above-market pharmacy volume growth and robust sales and market share gains in the front of the store."

On the earnings side, Shoppers Drug Mart posted first-quarter net income of $119.5 million, or 59 cents per share, compared with $118.8 million, or 56 cents per share, a year ago. The 2013 first-quarter earnings per share topped the consensus analyst estimate of 58 cents.

The company said gross profit rose 4.2% as strong sales growth, effective promotions and margin enhancement efforts helped offset downward pressure on pharmacy sales and margins. First-quarter operating income came in at $175 million, essentially flat compared with a year earlier.

In the first quarter, Shoppers Drug Mart opened seven new drug stores, including one relocation, and completed six major drug store expansions. The company also acquired four drug stores and one long-term care pharmacy, relocated one Shoppers Home Health Care store, and closed or consolidated five smaller drug stores.

As of March 23, Shoppers Drug Mart had 1,368 stores overall, including 1,241 Shoppers Drug Mart/Pharmaprix drug stores, 59 Shoppers Simply Pharmacy/Pharmaprix Simplement Santé drug stores, 62 Shoppers Home Health Care stores and six Murale prestige beauty stores.

Retail selling space was totaled 13.8 million square feet at the end of the first quarter, up 3% versus a year ago, the company added.

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