Despite a challenging environment for retail pharmacy and consumer spending, Shoppers Drug Mart Corp. posted healthy sales and earnings gains for its fiscal 2011 fourth quarter and full year.

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Shoppers Drug Mart ends fiscal year on strong note

February 9th, 2012

TORONTO – Despite a challenging environment for retail pharmacy and consumer spending, Shoppers Drug Mart Corp. posted healthy sales and earnings gains for its fiscal 2011 fourth quarter and full year.

Canada's largest drug chain said Thursday that for the fourth quarter ended Dec. 31, total revenue rose 4.3% year over year to nearly $2.61 billion (Canadian), fueled by moderate sales growth in pharmacy and robust business in the front end. Same-store sales in the quarter were up 3.4%

Prescription sales grew 2.8% overall to about $1.18 billion in the quarter and increased 2.3% on a same-store basis. Total script count climbed 3.9% and was up 3.8% on a comparable-store basis. Generic drugs represented 57.1% of prescriptions dispensed versus 55.7% in the prior-year period. In the quarter, prescriptions accounted for 45.2% of the company's sales, down slightly from 45.8% a year earlier.

In the front end, sales surged 5.5% in the fourth quarter to $1.43 billion, with robust gains seen in the beauty, candy and convenience food categories, according to Shoppers Drug Mart. Same-store sales in the front end rose 4.4%. The company noted that its efforts to expand selling space chainwide have helped drive front-end sales growth, along with strong marketing campaigns and promotions, seasonal programs and store-level execution.

Quarterly earnings were in line with financial analysts' forecast. For the fourth quarter, net income advanced 4.2% to $176 million, or 82 cents per diluted share, versus $168.9 million, or 78 cents per diluted share, a year ago. On average, analysts projected earnings per share of 82 cents.

Shoppers Drug Mart said the strong front-end performance was partially offset by continued investments in pricing and promotional activities, as well as by further sales and margin pressure in the pharmacy because of drug system reform initiatives in a number of provinces. However, the chain added that earnings also benefitted from cost reduction, productivity and efficiency initiatives in comparable stores, which partially offset higher operating expenses at store level related to network growth and expansion efforts.

"We are pleased with our fourth-quarter and full-year results for fiscal 2011. Considering the many challenges that we faced as a company this past year, I am encouraged by our operating and financial performance," Shoppers Drug Mart president and chief executive officer Domenic Pilla said in a statement.

"Looking ahead, the strength of our brand, the quality of our assets and the power of our value proposition, together with the dedication and commitment of our associate-owners and their teams at store level, have us well-positioned to confront the challenges and capitalize on the opportunities in the rapidly evolving pharmacy marketplace," Pilla added.

For the 52-week fiscal 2011 period, overall sales climbed 2.6% to about $10.46 billion. Same-store sales edged up 1.9%, reflecting increases of 3.2% in the front end and 0.6% in the pharmacy. Total revenue grew 4.4% to almost $5.5 billion in the front end and by 0.8% to nearly $5 billion in the pharmacy. Script count was up 3.8% on both a total and a same-store basis. In 2011, prescription revenue represented 47.8% of total sales, down from 48.7% a year earlier.

Net earnings in 2011 rose 3.7% to $614 million, or $2.84 per diluted share, from $592 million, or $2.72 per diluted share, in 2010.

Shoppers Drug Mart said that in 2011 it opened or acquired 56 drug stores, including 32 relocations, and consolidated or closed eight smaller drug stores, completed 25 major drug store expansions and converted 49 existing drug stores to smaller prototypes. As of Dec. 31, the retailer had 1,257 drug stores (1,199 Shoppers Drug Mart/Pharmaprix stores and 58 Shoppers Simply Pharmacy/Pharmaprix Simplement Santé stores), 63 Shoppers Home Health Care stores and eight Murale luxury beauty stores.

Looking ahead to fiscal 2012, Shoppers Drug Mart projects total sales to rise 2.5% to 3.0%, with same-store sales growth of 0.5% to 1.5% in pharmacy and 2.0% to 2.5% in the front end. Prescription count growth is pegged at about 4%, but the company noted that the impact of increased generic drug use and reduced generic reimbursement rates will  lower average prescription value. The chain didn't provide earnings guidance.

Plans for 2012 call for 40 to 45 new drug stores, including about 20 relocations, and up to 15 major drug store expansions. The retailer said between 25 and 30 drug stores also will be remodeled to smaller formats.