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Jean Coutu's 4Q, full-year results mixed amid generics surge
April 30th, 2014
LONGUEUIL, Quebec – Increased generic drug volume impacted sales but buttressed earnings for the fiscal 2014 fourth quarter and year at Jean Coutu Group.
The Canadian drug chain said Wednesday that for the fourth quarter ended March 1, retail sales at its franchised store network edged up 0.9% to nearly $1.06 billion (Canadian) from about $1.05 billion a year earlier. Revenue grew 0.5% in the front end and 0.6% in the pharmacy.
Sales of over-the-counter drugs, which represented 9.3% of total retail sales, dipped by 1.9% in the quarter, compared with growth of 4.8% in the year-ago period.
Prescription count in the fourth quarter rose 4.3% overall and by 3.9% on a comparable-store basis.
Generic drugs accounted for 67.2% of prescriptions filled in the 2014 fourth quarter versus 63.2% in the 2013 quarter. Jean Coutu noted that the rise in the number of generic prescriptions, which carry lower selling prices but higher profit marings than brand-name drugs, had a deflationary impact on the pharmacy retail sales. For the 2014 fourth quarter, the introduction of new generics reduced pharmacy sales growth by 1.3%, and price reductions of generic drugs reduced the growth of those sales by 1%.
On a same-store basis, the store network's 2014 fourth-quarter sales inched up 0.2%, reflecting decreases of 0.1% in the pharmacy and 0.2% in the front end.
For the 2014 fiscal year, Jean Coutu's retail store network saw sales gain 0.5% to about $4.06 billion from $4.04 billion in 2013. Fiscal 2014 revenue grew 0.1% in the pharmacy and 0.7% in the front end.
Same-store sales in 2014 declined 0.1%, including decreases of 0.5% in the pharmacy and 0.1% in the front end. Sales of OTC drugs, which represented 8.9% of total retail sales, increased by 0.6%, whereas these sales had risen 2.9% in 2013. Jean Coutu reported that new generics negatively impacted pharmacy sales growth by 1.9% for fiscal 2014, while price reductions of generics reduced Rx sales growth by 1% for the year.
In fiscal 2014, prescriptions filled climbed 4.7% overall and by 4.1% in comparable stores.
During the year, the retail network had 14 store openings, including six relocations, and two store closings. Also, 14 stores were significantly renovated or expanded. As of the year's end, Jean Coutu operated a network of 413 stores in Quebec, New Brunswick and Ontario under the banners of PJC Jean Coutu, PJC Clinique, PJC Santé and PJC Santé Beauté.
"We are satisfied with the results of the fourth quarter and fiscal 2014 that demonstrate the solid performance of our organization despite a highly competitive environment. Our efficiency in implementing our business plan, together with our employees and the pharmacist owners affiliated to the Jean Coutu network, contributed to affirm our leadership," François Coutu, president and chief executive officer of Jean Coutu Group, said in a statement.
"During the upcoming year, we expect to continue expanding our network and implement dynamic commercial strategies to ensure the evolution of our offer and favor retail sales growth," he added.
On the corporate side, Jean Coutu Group's revenue edged up 0.3% to $685.4 million during the fiscal 2014 fourth quarter but dipped 0.2% to $2.73 billion for the full year. The company attributed the decline to the deflationary impact of the significant gain in generic drug volume as well as to price cuts on generics.
Operating income before amortization (OIBA) increased to $87.5 million in the 2014 fourth quarter from $81.6 million a year earlier, in part due to the strong operational performance of the company's Pro Doc generic drug segment. For the full year, OIBA totaled $334.5 million, up from $323.0 million in fiscal 2013.
Fourth-quarter 2014 net earnings came in at $57.7 million, or 30 cents per share, up from $53.5 million, or 25 cents per share, in the 2013 quarter. Jean Coutu said the profit gain stemmed primarily from Pro Doc's robust performance.
Fiscal 2014 net income was $437 million, or $2.12 per share, versus $558.2 million, or $2.57 per share, in fiscal 2013. The decrease is attributed mainly to a gain of $212.7 million from Jean Coutu's sale of shares in Rite Aid Corp. during fiscal 2014, compared with $348 million in fiscal 2013.
According to Jean Coutu, net profit before gains related to the Rite Aid investment and change in fair value of other financial assets amounted to $224.3 million, or $1.09 per share, for fiscal 2014 versus $211.3 million, or 97 cents per share, for fiscal 2013. Basic profit per share before gains related to the Rite Aid investment and change in fair value of other financial assets would have been $1.19 for fiscal 2014, based on the number of outstanding shares as of March 1, Jean Coutu said.