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Shoppers Drug Mart finishes fiscal year on high note
February 7th, 2013
TORONTO – Shoppers Drug Mart Corp. ended fiscal 2012 with solid revenue gains for the fourth quarter and full year, along with upticks in earnings per share.
Canada's largest drug chain said Thursday that for the fourth quarter ended Dec. 29, total sales rose 4.4% year over year to $2.72 billion (Canadian). The company attributed the increase to strong volume growth in the pharmacy and further sales and market-share gains in the front end.
In the pharmacy, sales grew 3.7% to $1.22 billion, with robust growth in prescriptions filled at retail, plus sales gains in the long-term care and specialty pharmacy business units, partially offset by a reduction in average prescription value, according to Shoppers Drug Mart. Pharmacy sales accounted for 44.8% of total revenue in the quarter, compared with 45.2% a year earlier.
Front-end revenue in the fourth quarter climbed 5% to $1.5 billion, led by strong growth in over-the-counter medications, cosmetics, food and candy, the retailer said. The company noted that front-of-store sales growth was fueled by increased drug store selling space versus a year ago, effective seasonal marketing and promotional campaigns, a strong cough/cold/flu season, and solid program execution at store level.
On a same-store basis, fourth-quarter sales were up 2.7%, reflecting gains of 3.2% in the front end and 2.1% in the pharmacy. Prescription count increased 8.3% overall and 6.1% on a same-store basis during the quarter.
Shoppers Drug Mart said pharmacy volume growth was especially strong in Ontario, driven by the implementation and acceptance of a program to waive the $2 co-payment on eligible prescriptions for seniors, as well as in western Canada, where the chain completed some acquisitions in the second half of the year, including Paragon Pharmacies Ltd.
Year-over-year, average prescription value at retail declined 6% in the fourth quarter, mainly from further provincial reductions in generic drug reimbursement rates and from rising utilization of lower-priced generics, the company said. Generics comprised 60.2% of prescriptions dispensed in the quarter versus 57.1% a year before.
On the profit side, Shoppers Drug Mart reported a dip in net earnings for the fourth quarter but a gain in earnings per share (EPS), exceeding the consensus analyst estimate by a penny.
Fourth-quarter net income came in at $175 million, compared with $176 million in the prior-year period. Net EPS were 85 cents on a diluted basis, up from 82 cents a year earlier. Analysts, on average, had forecast EPS of 84 cents.
The retailer said operating income declined to $250 million in the fourth quarter from $256 million a year ago, as strong sales growth and a continued focus on cost reduction, productivity and efficiency initiatives in comparable stores was offset by downward pressure on pharmacy margins and higher operating expenses related to the company's network growth and expansion initiatives, along with increased associate earnings.
"We are pleased with our fourth-quarter and full-year results. In spite of the persistent regulatory headwinds that we face as an industry and a company, we remain encouraged by our underlying operating results and financial performance," Shoppers Drug Mart president and chief executive officer Domenic Pilla said in a statement.
"Clearly, our brand and our value proposition — which is grounded upon the pillars of health, beauty and convenience — continue to resonate with our customers and patients in the communities we serve from coast to coast," Pilla stated.
For the 52-week fiscal year, Shoppers Drug Mart's sales advanced 3.1% to $10.78 billion. Revenue was up 2.1% in the pharmacy and 4% in the front of the store. Pharmacy sales represented 47.3% of the sales mix for 2012, compared with 47.8% in 2011.
Same-store sales for 2012 rose 2.2%, including increases of 1.2% in the pharmacy and 3.1% in the front end.
Net earnings in 2012 totaled $608 million, or $2.92 per share, compared with $614 million, or $2.84 per share, in 2011. The company said the earnings result reflects restructuring, store closure and other charges. Excluding those items, 2012 adjusted net EPS was $2.94. On average, analyst had projected the drug chain's 2012 EPS at $2.92.
Shoppers Drug Mart said it opened 41 new drug stores, including 23 relocations, and completed 12 major drug store expansions during 2012. The company also acquired 33 drug stores during the year, eight of which were amalgamated with existing stores. In addition, 15 drug stores were converted to smaller formats, and five smaller drug stores were consolidated or closed. The retailer, too, closed two Murale luxury beauty stores and one Shoppers Home Health Care store.
At the end of 2012, Shoppers Drug Mart had 1,363 stores overall, including 1,295 drug stores (1,240 Shoppers Drug Mart/Pharmaprix stores and 55 Shoppers Simply Pharmacy/Pharmaprix Simplement Santé stores), 62 Shoppers Home Health Care stores and six Murale stores. During 2012, the selling square footage of the retail store network increased by 3.4% to 13.7 million square feet, the company said.