TORONTO — Earnings climbed in the third quarter at Shoppers Drug Mart Corp. despite slim gains in total revenue and same-store sales.
The Canadian drug store chain said Wednesday that for the third quarter ended Oct. 8, overall sales were $3.11 billion (Canadian), up 2.1% from a year earlier. Comparable-store sales increased 1.5%.
In the front end, sales rose 2.6% to nearly $1.6 billion in the third quarter, led by strength in cosmetics, food and confection and other convenience categories, according to Shoppers Drug Mart. On a same-store basis, front-end sales increased 1.8%.
Prescription sales, meanwhile, eked out a 1.5% increase in the quarter to $1.51 billion. The company said growth in the number of prescriptions filled remained strong, but that volume growth is being diluted by a decline in average prescription value. Same-store prescription sales edged up 1.1%.
During the third quarter, total prescription counts increased 3.6% and were up 3.4% on a same-store basis. Shoppers Drug Mart noted that the decrease in average prescription value stems from lower generic drug reimbursement rates resulting from drug system reform initiatives in parts of Canada plus rising generic drug utilization. Generic molecules represented 56.9% of prescriptions dispensed in the quarter versus 54.8% a year earlier.
On the earnings side, third-quarter net income came in at $172 million, or 80 cents per share, including a gain on disposal of $3 million (pretax) from a sale-leaseback transaction involving some company retail properties. Excluding that gain, adjusted net earnings for the quarter were $170 million, or 79 cents per share, up 5% from adjusted net earnings of $162 million, or 74 cents per share, a year earlier. Adjusted net earnings for the prior year exclude the impact of a charge of 3 cents per share to settle a long-standing legal dispute.
Shoppers Drug Mart said a solid performance in the front of the store was partially offset by continued downward pressure on sales and margin dollars in the pharmacy from drug system reforms. Still, the company noted, the earnings result reflects benefits from cost reduction, productivity and efficiency initiatives in comparable stores, which partially offset higher operating costs at store level related to network growth and expansion initiatives, along with increased associate earnings.
"We are encouraged by the company’s performance in the third quarter and results thus far in fiscal 2011," stated Shoppers Drug Mart president and chief executive officer Domenic Pilla, who took the reins as CEO on Nov. 1. "This remains a difficult period of transition as we continue to work through government reform initiatives in a number of provinces and the resultant funding and reimbursement pressures this has placed on our pharmacy business. Together with our associate-owners and their teams at store level, we are confident that our commitment to patient care and customer service, along with our merchandising strategies and promotional campaigns, have us well-positioned entering the final quarter of the year."
During the third quarter, Shoppers Drug Mart opened 15 drug stores, including three acquired outpatient hospital pharmacies and six relocations; closed one smaller drug store; and completed eight major drug store expansions. Also, 18 drug stores were converted to smaller-prototype formats.
As of Oct. 8, Shoppers Drug Mart had 1,328 stores overall, including 1,257 drug stores (1,198 Shoppers Drug Mart/Pharmaprix stores and 59 Shoppers Simply Pharmacy/Pharmaprix Simplement Santé stores), 63 Shoppers Home Health Care stores and eight Murale luxury beauty stores. Retail selling space was about 13.2 million square feet at the end of the third quarter, up 4.3% versus a year ago.
