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Jean Coutu Group turns in year-end gains
April 28th, 2011
LONGUEUIL, Quebec – Jean Coutu Group and its franchised drug store network closed out fiscal 2011 on the upside in sales, and the company's earnings exceeded analysts' forecast.
The Canadian pharmacy franchisor said Thursday that retail sales for its store network rose 3.9% year over year to $988.5 million (Canadian) for the fourth quarter ended Feb. 26. Sales gained 3.4% in the pharmacy and 4.2% in the front end.
Same-store sales inched up 1.4% in the quarter, reflecting increases of 0.9% in the pharmacy and 1.5% in the front end. Jean Coutu said that, during the quarter, sales of nonprescription drugs grew 8.5%, compared with growth of 2.7% in the prior-year period. The company attributed the gain to a stronger flu season this year, which lifted sales of cough, cold and flu medications.
Generic drugs represented 55.6% of prescriptions in the fiscal 2011 fourth quarter, up from 51.2% a year earlier. According to Jean Coutu, the increase in generic prescriptions had a deflationary impact, reduced pharmacy retail sales growth by 3.4%. In addition, the company said the generic drug price reduction enacted by the Quebec government trimmed pharmacy retail sales growth by 1% in the quarter.
For the 2011 fiscal year, Jean Coutu's franchised store network saw sales climb 3.9% to nearly $3.78 billion, with revenue up 3.9% in the pharmacy and 3.2% in the front end. Same-store sales gained 1.6%, driven mainly by a 1.9% rise in the pharmacy versus a 0.3% uptick in the front end.
The network had 30 store openings in fiscal 2011, including nine relocations, and two stores were closed. Also, 26 stores were significantly renovated or expanded, the company said. Currently, the network has 389 franchised stores in Quebec, New Brunswick and Ontario under the banners PJC Jean Coutu, PJC Clinique, PJC Santé and PJC Santé Beauté.
For the Jean Coutu Group overall, revenue rose 2.6% to $655.6 million for the fourth quarter and was up 2.2% to $2.60 billion for fiscal 2011. Merchandise sales to franchisees through Coutu distribution centers account for most of the company's revenue.
Operating income before amortization (OIBA) increased to $75.6 million for the fourth quarter from $71.2 million a year earlier, which the company attributed to a strong operational performance in franchising activities and by its Pro Doc Ltd. subsidiary. In fiscal 2011, OIBA climbed to $291.1 million, compared with $268.8 million in fiscal 2010.
Net earnings totaled $46.4 million, or 20 cents per share, in the 2011 fourth quarter, up from $42.8 million, or 18 cents per share, a year ago. Full-year 2011 net earnings gained as well, rising to $180.2 million, or 77 cents per share, from $112.6 million, or 48 cents per share, in 2010.
Financial analysts had projected Jean Coutu's earnings per share at 19 cents for the fourth quarter and at 76 cents for the 2011 fiscal year.
"We are very satisfied with the results of the fourth quarter and fiscal year 2011. We successfully continued the implementation of our business plan, which resulted in a strong growth in our net earnings," president and chief executive officer François Coutu said in a statement. "Our network's continuous expansion and our operations' growth allowed us to partly offset deflationary impact on revenues from the price reduction of generic drugs."
Jean Coutu Group noted that more price reductions are scheduled until April 2012 to ensure that the generic product price isn't higher than selling prices granted to other provincial drug insurance programs. Also, the company said that since April 20 the administration fee percentage was increased from 6% to 6.25% and, beginning in April 2012, will rise again to 6.5% for generics and innovator products. The fee came about after the abolishment of 5% rebates from generic drug makers last December.
"The consolidated results of the corporation will be affected by these measures," Jean Coutu Group stated, but we believe that the impact will be offset in the short term by normal growth of the corporation's operations."