Shoppers Drug Mart Corp. saw revenue and same-store sales edge up for its 2012 second quarter.


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Sales climb in 2Q at Shoppers Drug Mart

July 19th, 2012

TORONTO – Shoppers Drug Mart Corp. saw revenue and same-store sales edge up for its 2012 second quarter.

The Canadian drug chain's net earnings dipped in the second quarter versus a year ago, although earnings per share rose and were in line with the consensus estimate of financial analysts.

Shoppers Drug Mart said Thursday that for the 12-week quarter ended June 16, total sales grew 2.6% year over year to nearly $2.46 billion (Canadian), fueled by modest sales growth in pharmacy and strong results in the front end.

Overall same-store sales for the second quarter increased 2.2% , reflecting gains of 3.4% in the front end and 0.8% in the pharmacy.

Front-end revenue was up 3.6% to almost $1.29 billion, led by strong growth in cosmetics, food and candy, according to Shoppers Drug Mart. The company also cited a 4.2% increase in drug store selling space as spurring sales growth, namely in the front of the store, along with effective marketing campaigns and promotions.

In the pharmacy, sales inched up 1.5% to $1.17 billion in the second quarter. The company pointed to solid growth in the number of prescriptions filled at retail plus strong sales gains in its MediSystem Technologies and Specialty Health Network businesses, partially offset by a reduction in average prescription value.

Prescriptions filled at retail climbed 4.2% in the second quarter and rose 3.8% on a same-store basis. Shoppers Drug Mart said the decrease in average prescription value stems mainly from reductions in generic drug reimbursement due to ongoing drug system reform efforts in Canada, along with risiing generic drug utilization. Generics accounted for 58.6% of prescriptions dispensed in the second quarter, compared with 56.9% a year earlier. In the 2012 quarter, prescriptions represented 47.7% of total revenue, down from 48.2% in the 2011 quarter.

On the earnings side, 2012 second-quarter net income — including a pretax charge of $5 million from the closing of two Murale luxury beauty stores — came in at $146 million, compared with $148 million a year earlier. Diluted net earnings per share (EPS) were 70 cents, up from 68 cents in the prior-year period and in line with the consensus analyst project of 70 cents.

Excluding the impact of store closing charge, adjusted net earnings for the second quarter were $149 million, or 71 cents per diluted share, Shoppers Drug Mart said. The company also reported that strong sales growth, along with a disciplined approach to margin management, led to a 3.4% gain in gross profit dollars for the quarter versus a year ago.

"We are pleased with our second quarter operating and financial results. This performance speaks to the strength of our value proposition in what remains a challenging economic environment," president and chief executive officer Domenic Pilla said in a statement. " It is also a testament to the quality of our people, including our associate-owners and their teams at store level, as they continue to execute on our strategic priorities and initiatives in order to mitigate the impact of regulatory reforms on our business."

For the first half ended June 16, overall sales increased 2.3% to $4.85 billion, with pharmacy sales up 1.5% and front store sales up 3.1%. Comparable-store sales rose 1.9%, including gains of 1% in the pharmacy and 2.7% in the front end. Script count grew 3.6% overall and 3.2% on a same-store basis.

Net earnings in the half, reflecting the charge from the Murale store closings, totaled $265 million, essentially flat versus a year earlier, Shoppers Drug Mart said. Diluted EPS for the half was $1.26 compared with $1.22 in the same period last year. Excluding the impact of the charge, adjusted net earnings for the first half of 2012 were $269 million, or $1.28 per diluted share, the company reported.

Shoppers Drug Mart said that during the second quarter it opened or acquired 15 drug stores, including seven relocations, and completed two major drug store expansions. Three drug stores also were converted to smaller formats, and two Murale stores were closed.

As of June 16, the retailer had 1,340 stores, including 1,215 Shoppers Drug Mart/Pharmaprix drug stores, 56 Shoppers Simply Pharmacy/Pharmaprix Simplement Santé stores, 63 Shoppers Home Health Care stores and six Murale stores.

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