LONGUEUIL, Quebec — Despite a sales uptick in its franchise store network, Jean Coutu Group turned in a mixed revenue performance and declined earnings for its 2013 fourth quarter and fiscal year.
The Canadian drug store operator said Wednesday that for the 13-week fourth quarter ended March 2, corporate revenue fell 7.4% to $682.7 million (Canadian) from $737.2 million in the 14-week 2012 quarter.
For the 2013 fiscal year, which had 52 weeks, sales were essentially flat, up 0.2% to $2.74 billion from $2.73 billion for the 53-week 2012 fiscal year.
The company attributed the slight sales gain to overall market growth and the expansion of its franchise store network, despite the extra week in 2012 and deflationary impact from the introduction of lower-priced generic drugs and price reductions on some generics.
Jean Coutu Group’s revenue stems mainly from merchandise sales to franchisees and other franchising activities.
The franchise store network, meanwhile, saw total sales edge up 1.4% to $1.05 billion for the 2013 fourth quarter, including gains of 2.2% in the front end and 0.9% in the pharmacy. Overall same-store sales grew 0.5% in the quarter, reflecting a 1.3% increase in the front end and a 0.1% decrease in the pharmacy.
Prescription count rose 5.4% overall and 4.1% on a same-store basis in the fourth quarter. Generic drugs accounted for 63.2% of scripts dispensed in the quarter, up from 57.4% a year earlier. Sales of nonprescription drugs, which represented 9.5% of fourth-quarter sales, increased by 4.8%, compared with 3.2% in the prior-year period.
For fiscal 2013, the franchise network’s total revenue climbed 2.9% to $4.04 billion, with sales up 3.2% in the pharmacy and 2.3% in the front end. Comparable-store sales grew 2% for the year, including gains of 2.2% in the pharmacy and 1.5% in the front end. Script count increased 5.8% overall and 4.7% on a same-store basis for the year. Over-the-counter drug sales, which represented 8.9% of total retail sales, rose 2.9% in fiscal 2013 versus 3.5% in fiscal 2012.
Jean Coutu Group said new generics reduced pharmacy retail sales growth by 2.9% in the fourth quarter and by 2.1% for fiscal 2013, while generic drug price cuts lowered pharmacy sales by 1.4% in the quarter and by 1.2% for the full year.
"We are satisfied with the results of the fourth quarter and fiscal 2013 that demonstrate the solid operational performance of our organization in spite of the difficult regulatory environment in which our industry evolves," 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 we will be working together with our affiliated pharmacists to implement effective commercial strategies and thus favor retail sales growth."
Earnings decreased for both the 2013 fourth quarter and full year and fell short of financial analysts’ consensus estimate. Fourth-quarter net earnings were $53.6 million, or 25 cents per share, compared with $62 million, or 28 cents per share, a year earlier. On average, analysts had projected earnings at 26 cents per share for the quarter.
Jean Coutu Group said the decrease in net profit stems mainly from the additional week in the fourth quarter, despite a solid operational performance by its franchising activities and Pro Doc generic drug business.
For the year, net income came in at $558.4 million, or $2.57 per share, compared with $230 million, or $1.03 per share, in fiscal 2012. The company said the increase in net profit reflects gains of $348 million related to its investment in Rite Aid Corp. during fiscal 2013, compared with a gain of $22 million in 2012. Net profit before gains related to the Rite Aid investment and change in fair value of other financial assets amounted to $211.5 million, or 97 cents per share, for fiscal 2013 versus $206.1 million, or 92 cents per share, in 2012. Analysts’ had forecast adjusted earnings of 99 cents per share for fiscal 2013.
During fiscal 2013, Jean Coutu Group’s retail network opened 16 stores, relocated six stores, remodeled or expanded 12 stores, and closed two stores. As of the year’s end, the company had 407 drug stores in the Quebec, New Brunswick and Ontario under the banners PJC Jean Coutu, PJC Clinique, PJC Santé and PJC Santé Beauté.
The store network’s total selling space grew to 3.04 million as of March 2 from 2.97 million square feet a year earlier.
Jean Coutu Group said that in fiscal 2014 it plans to open or relocate 17 stores as well as remodel or expand 32 stores, lifting total selling square footage to 3.15 million.
