LONGUEUIL, Quebec — Solid gains in the pharmacy help lift sales at Jean Coutu Group’s franchised drug store network for the fiscal 2013 first quarter.
The Canadian pharmacy retailer also saw earnings surge during the quarter ended June 2, largely stemming from a reduction of its investment in Rite Aid Corp. Excluding that change, net earnings per share (EPS) still exceeded the consensus analyst estimate by a penny.
Jean Coutu Group said Tuesday that total revenue for its franchised store network grew 4.3% to $998.3 million (Canadian) in the first quarter from $957.2 million a year earlier. Sales rose 5.1% in the pharmacy and 3.3% in the front end.
Same-store sales were up 3.4% overall in the first quarter, reflecting gains of 4% in the pharmacy and 2.5% in the front end. Total prescriptions filled increased 6.5%. On a comparable-store basis, the prescription count rose 5.3%.
Coutu noted that over-the-counter drug sales in the first quarter, which represented 8.6% of total retail sales, edged up 0.6%, compared with 6.6% in the prior-year period.
Generic drugs accounted for 58.8% of prescriptions during the 2013 first quarter, up from 56.5% a year earlier. Coutu said pharmacy retail sales reflect negative impacts of 1.1% from generic drug introductions and 1.1% from generic drug price cuts by the Quebec government.
During the quarter, the retail network had three store openings, including one relocation, and one store was closed and six stores were significantly remodeled or expanded. As of June 2, Jean Coutu’s network encompassed 400 drug stores in Quebec, New Brunswick and Ontario under the banners PJC Jean Coutu, PJC Clinique, PJC Santé and PJC Santé Beauté.
"We are very satisfied with the results of the first quarter of fiscal year 2013, which demonstrate the excellent performance of our operations. Our network retail sales, and more particularly those of the pharmaceutical section, posted a significant increase despite the price reductions of generic drugs," Jean Coutu Group president and chief executive officer François Coutu said in a statement. "We began fiscal year 2013 with optimism, and we will continue to put the necessary efforts to ensure our growth and maintain our leadership."
For the Jean Coutu Group, fiscal 2013 first-quarter revenue — which comes primarily from the company’s franchising activities and merchandise sales to franchisees — increased 3.2% to $681.5 million from $660.6 million in the year-ago period. The company attributed the gain to overall market growth and the expansion of the franchised stores network, while new generic drugs and provincial price reductions on generics had a deflationary impact.
On the earnings side, fiscal 2013 first-quarter net income swelled to $397.4 million, or $1.81 per share, from $49.9 million, or 22 cents per share, a year earlier. The increase resulted primarily from a $82.8 million realized gain and a $265.2 million unrealized gain related to Jean Coutu Group’s investment in Rite Aid.
The company noted that during the first quarter it sold 56 million shares of Rite Aid, or nearly 24% of its equity interest in the U.S. drug chain, for $82.8 million. Jean Coutu said that after the shares were sold, it lost its significant influence over Rite Aid, and its investment in the chain is now considered as an available-for-sale investment and is accounted for at fair value, generating a noncash gain of $265.2 million, the fair value of the 178.4 million Rite Aid shares it still owns.
Jean Coutu reported that its first-quarter net profit before gains related to the Rite Aid investment and change in fair value of other financial assets was $51.7 million, or 24 cents per share, compared with $49.6 million, or 22 cents per share, a year earlier. The consensus analyst EPS forecast for the fiscal 2013 quarter was 23 cents.
Operating income before amortization (OIBA) grew 3% year over year to $79.4 million in the first quarter. The company said the increase stemmed mainly from the strong operational performance of Pro Doc Ltd., its generic drugs manufacturing business, as well as franchising activities. Gross sales at Pro Doc rose 5.3% to $37.8 million in the quarter.
