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Shoppers Drug Mart sales, profit edge up in 1Q
April 26th, 2012
TORONTO – Robust front-end business lifted sales and earnings at Shoppers Drug Mart Corp. in the first quarter.
The Canadian drug chain said Thursday that for the first quarter ended March 24, total revenue rose 2% to $2.39 billion (Canadian) from nearly $2.35 billion a year earlier. Overall same-store sales were up 1.5%.
Shoppers Drug Mart noted that a calendar shift that led to the inclusion of an extra holiday (New Year's Day) in the first quarter, combined with a relatively weak cold and flu season, moderated the rate of increase in year-over-year sales growth.
In the front end, sales climbed 2.5% in the quarter to about $1.23 billion, led by strong gains in cosmetics and select convenience categories, such as food and confections, the chain drug retailer said. The company added that its store network development program, which boosted selling space 4.2% versus a year ago, also fueled sales growth in the front of the store. On a same-store basis, front-end sales gained 2% in the quarter.
Prescription sales were up 1.6% to almost $1.17 billion in the first quarter. The company noted that growth in the number of prescriptions filled continues to be partially offset by a reduction in average prescription value. Same-store prescription sales increased 1.1% during the period.
Prescription count in the quarter advanced 2.9% year over year and rose 2.7% on a same-store basis. Adjusting for the impact of the calendar shift, the number of prescriptions dispensed would have increased 3.5% year over year and 3.2% on a same-store basis, Shoppers Drug Mart said.
The decrease in average prescription value mainly stems from a reduction in generic drug reimbursement rates due to drug system reforms in certain areas of Canada, along with rising generic drug utilization rates, according to the company. Generics represented 57.6% of prescriptions dispensed in the first quarter, up from 56.6% a year earlier. In the first quarter of 2012, prescription sales accounted for 48.8% of the sales mix, compared with 49% in the prior-year period.
"We are encouraged by our first quarter operating and financial results. This is a solid performance and a good start to the year in what remains a challenging economic and regulatory environment," Domenic Pilla, president and chief executive officer of Shoppers Drug Mart, said in a statement. "Together with our associate-owners and their teams at store level, we continue to work through the impact of regulatory reforms on our business, while never compromising on our commitment to providing the best in patient care and customer service."
On the earnings side, net income inched up to $119 million, or 56 cents per diluted share, in the first quarter of 2012 from $118 million, or 54 cents per diluted share, a year earlier. That result was in line with the average analyst estimate of 56 cents per share.
Shoppers Drug Mart said strong front-end sales, plus a disciplined approach to managing pricing and promotions, helped offset pressure on sales and margins in the pharmacy, resulting in a 3.6% increase in gross profit dollars versus a year ago. Operating and administrative expenses increased 4.9%, driven primarily by higher store-level expenses, namely occupancy, wages and benefits related to the company's network growth and expansion initiatives, along with increased associate earnings.
During the first quarter, Shoppers Drug Mart opened or acquired 14 drug stores, including six relocations, and closed two smaller drug stores were closed. The retailer said it also completed three major drug store expansions and converted seven drug stores to smaller prototypes.
As of March 24, the chain had 1,334 stores overall, including 1,263 drug stores (1,206 Shoppers Drug Mart/Pharmaprix stores and 57 Shoppers Simply Pharmacy/Pharmaprix Simplement Santé stores), 63 Shoppers Home Health Care stores and eight Murale luxury beauty storesstores. Retail selling space was about 13.4 million square feet at the end of the first quarter, an increase of 4.2% from a year ago.