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Jean Coutu reports uptick in sales, earnings
July 9th, 2013
LONGUEUIL, Quebec – Despite the deflationary impact of new generic drugs, Jean Coutu Group posted a slight revenue and same-store sales gains for its fiscal 2014 first quarter, while adjusted earnings were in line with analysts' forecast.
The Canadian drug chain said Tuesday that for the first quarter ended June 1, retail sales for its franchised store network edged up 1.2% to $1.01 billion (Canadian) from $998.3 billion a year earlier. Revenue rose 2% in the front end and 0.6% in the pharmacy.
On a same-store basis, sales increased 0.6%, reflecting a 1.5% gain in the front end and flat results in the pharmacy. Prescription count, however, climbed 4.9% overall and 4.3% on a comparable-store basis, the company said.
Sales of over-the-counter drugs, which accounted for 8.8% of total retail sales, advanced by 3.6% in the first quarter, compared with a 0.6% increase in the prior-year period.
Generics represented 66% of prescriptions filled in the first quarter, up from 58.8% a year earlier. Jean Coutu said the introduction of new generics reduced pharmacy retail sales growth by 3.3% and price cuts for generics pared Rx sales by 1.1%. Generic drugs carry lower selling prices than branded drugs but have higher profit margins.
During the first quarter, Jean Coutu's franchise network opened two stores, including one relocation, and closed one store. Five stores were significantly remodeled or expanded. As of June 1, the network encompassed 407 drug stores in Quebec, New Brunswick and Ontario under the banners PJC Jean Coutu, PJC Clinique, PJC Santé and PJC Santé Beauté.
Selling square footage for the store network totaled nearly 3.05 million square feet as of the quarter's end, up from about 2.98 million square feet in the year-ago period.
"We are satisfied with the results recorded in the first quarter. Operating income showed solid growth in spite of the deflationary impact of generic drugs on pharmacy sales," François Coutu, president and chief executive officer of Jean Coutu Group, said in a statement. "The pharmacies affiliated to our network still show the best performance of the industry. We will therefore continue to implement effectively our business plan to pursue our growth over the coming quarters and maintain our leadership."
On the corporate side, Jean Coutu Group's revenue was virtually flat for the fiscal 2014 first quarter, coming in at $681.6 billion versus $681.5 billion in the 2013 quarter. The company attributed the uptick to overall market growth and the expansion of the franchised store network, despite the deflationary impact new generics and generic drug price reductions.
Jean Coutu Group's revenue derives mainly from merchandise sales to franchisees and other franchising activities.
Operating income before amortization (OIBA) rose to $81.8 million in the first quarter (12% of sales) from $79.4 million (11.7% of sales) in the prior-year period. Jean Coutu said the gain stems primarily from a strong operational performance by its Pro Doc generic drug subsidiary and franchising activities.
Jean Coutu's adjusted net earnings, excluding gains from its sale of Rite Aid Corp. shares, came in at $54.2 million, or 26 cents per share, for the 2014 first quarter compared with $51.6 million, or 24 cents per share, in the 2013 quarter. Analysts, on average, had forecast 2014 first-quarter adjusted earnings of 26 cents per share, according to Zacks Investment Research.
Including gains from the sale of Rite Aid shares in both fiscal first quarters, Jean Coutu's net profit was $108.6 million, or 51 cents per share, in the 2014 quarter, compared with $397.3 million, or $1.81 per share, a year earlier. The company noted that the decrease reflects a gain of $54.4 million for the 2014 first quarter from the sale of Rite Aid shares versus a gain of $348 million from the sale of Rite Aid shares in the prior-year period.
Late last month, Jean Coutu announced that it sold up to 40.5 million of its Rite Aid shares, for total proceeds of $110.8 million (U.S.). The company said the sale reduced its ownership of Rite Aid's outstanding common stock to 7.2% and that, as a result of the sale, it plans to record a $50 million (U.S.) net profit gain for its fiscal 2014 second quarter.