TORONTO — Front-end business and script count growth helped boost sales at Shoppers Drug Mart Corp. in the third quarter.
Canada’s largest drug chain said Tuesday that for the 16-week quarter ended Oct. 6, revenue rose 3.2% year over year to nearly $3.21 billion (Canadian), with same-store sales up 2.3%.
Front-end sales climbed 4.6% to $1.67 billion in the third quarter, fueled by robust growth in cosmetics, over-the-counter medicines, and food and confections, according to Shoppers Drug Mart. The company noted that its store network development program, which expanded drug store selling space by 4% from a year ago, has helped drive sales growth in the front end. Strong marketing campaigns and promotions, including the retailer’s 50th anniversary celebration, which ran for 16 days in September, also gave a lift to the front of the store, the chain added.
On a same-store basis, front-end sales increased 3.6% during the quarter.
In the pharmacy, sales edged up 1.7% to $1.54 billion in the third quarter and accounted for 48% of total revenue, compared with 48.7% in the year-ago quarter. Shoppers Drug Mart said strong growth in the number of prescriptions filled at retail, along with sales gains at its MediSystem Technologies and Specialty Health Network businesses, helped drive growth, partially offset by a further reduction in average prescription value. Comparable pharmacy sales were up 0.9% in the quarter.
Prescriptions filled swelled 6% during the third quarter and grew 5% on a comp-store basis. The company cited its acquisition of the 19-store western Canada drug chain Paragon Pharmacies as a key factor behind the growth in prescription count. The implementation and acceptance of a program in Ontario to waive the $2 co-pay on prescriptions for seniors also bolstered dispensed prescriptions.
Shoppers Drug Mart attributed the declined average prescription value mainly to further reductions in generic drug reimbursement rates, stemming drug system reform initiatives in Canada, along with rising generic utilization rates. Generics accounted for 60.1% of the chain’s script count in the third quarter, up from 56.9% a year earlier.
On the earnings side, Shoppers Drug Mart’s per-share results were in line with analysts’ forecast for the third quarter.
Net income for the quarter came in at $168 million, compared with $172 million a year ago. The company noted that earnings for the 2012 quarter reflect a pretax restructuring charge of $13 million, primarily from the rationalization of central office functions, and an offsetting pretax gain on disposal of $13 million from a retail sale-leaseback transaction. Also, the prior-year period included a pretax gain on disposal of $3 million from a retail sale-lease back transaction.
Excluding those items, adjusted net earnings per diluted share were 81 cents in the 2012 third quarter, matching the consensus analyst projection and exceeding EPS of 79 cents a year earlier.
"We are pleased with our third-quarter operating and financial results. This is a strong performance in the context of a challenging economic and competitive environment," Shoppers Drug Mart president and chief executive officer Domenic Pilla said in a statement. "And while headwinds remain on the regulatory front, we are encouraged by the early success of our pharmacy growth initiatives, along with the steps we have taken to further reduce costs and promote efficiencies.
"Looking ahead we are confident that, together with our associate-owners and their teams at store-level, we have the right programs in place to build upon this momentum, deliver on our value proposition and enhance total shareholder returns," Pilla added.
In the third quarter, Shoppers Drug Mart opened 10 new drug stores, including six relocations, and finished five major store expansions. The retailers also acquired 21 drug stores during the quarter, including the 19 Paragon pharmacies.
In addition, three drug stores were converted to smaller formats, and two smaller drug stores were closed. Three Shoppers Home Health Care stores also were relocated.
As of Oct. 6, Shoppers Drug Mart’s network encompassed 1,363 stores, including 1,237 Shoppers Drug Mart/Pharmaprix drug stores, 57 Shoppers Simply Pharmacy/Pharmaprix Simplement Santé drug stores, 63 Shoppers Home Health Care stores and six Murale prestige beauty stores.
