Shoppers Drug Mart Corp. posted increased sales for its fiscal 2013 fourth quarter and full year, with adjusted earnings topping analysts' consensus forecast.

Shoppers Drug Mart, fiscal 2013, fourth quarter, full year, adjusted earnings, Canada's largest drug chain, Domenic Pilla, Loblaw, pharmacy sales, prescription count, front-end sales, same-store sales, comparable pharmacy sales, prescriptions filled, fourth-quarter net income, net earnings, new drug stores, Pharmaprix

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Shoppers Drug Mart finishes 2013 on positive note

February 6th, 2014

TORONTO – Shoppers Drug Mart Corp. posted increased sales for its fiscal 2013 fourth quarter and full year, with adjusted earnings topping analysts' consensus forecast.

Canada's largest drug chain said Thursday that for the fourth quarter ended Dec. 28, sales rose 0.9% to nearly $2.75 billion (Canadian) from $2.72 billion a year earlier. The company attributed the uptick to gains in front-end sales and prescription count growth. Same-store sales were up 1.2% during the quarter.

Pharmacy sales were up 0.8% to $1.23 billion in the fourth quarter, driven by strong growth in prescriptions filled at retail and partially offset by a further reduction in average prescription value, according to Shoppers Drug Mart. The retailer said pharmacy sales represented 44.8% of total revenue, the same as a year ago. Comparable pharmacy sales in the quarter increased 0.5%.

Retail script count advanced 5% overall in the fourth quarter and rose 4.7% on a same-store basis. Shoppers Drug Mart said pharmacy volume grew in all regions and was especially strong in Ontario.

Year over year, average prescription value at retail declined 3.8% during the fourth quarter of 2013, largely because further reductions in generic drug reimbursement rates from provincial health reforms and increased generic utilization rates, Shoppers Drug Mart said. Generics accounted for 62.4% of prescriptions dispensed in the fourth quarter, up from 60.2% in the prior-year period.

In the front end, sales edged up 1.1% in the fourth quarter to nearly $1.52 billion, led by robust growth in cosmetics, food and confections, Shoppers Drug Mart reported. The company noted that the gain was strong relative to the marketplace and came despite a year-over-year sales decline in over-the-counter medicines from a slower cough/cold season. On a same-store basis, front store sales increased 1.7%.

Fourth-quarter net income came in at over $169 million, or 85 cents per diluted share, compared with nearly $175 million, or 85 cents per diluted share, a year earlier. Shoppers Drug Mart noted that net earnings reflect $3 million in transaction-related costs from its pending acquisition by Loblaw Cos. Excluding those costs, adjusted net earnings for the quarter were $172 million, or 86 cents per diluted share, compared with $175 million, or 85 cents per diluted share, in the year-ago period.

The retailer added that its share repurchase program had a positive impact on growth in adjusted net earnings per share (EPS) in the fiscal 2013 fourth quarter, since there were 2.4% fewer diluted shares outstanding (on a weighted average basis) versus the fiscal 2012 quarter.

On average, analysts had projected Shoppers Drug Mart's fourth-quarter adjusted EPS at 84 cents, according to Zacks Investment Research.

"We are pleased with our fourth quarter and full-year operating and financial results. By any measure, our performance in the fourth quarter of 2013 is a successful conclusion to what has been a very successful year for our company and its shareholders," Shoppers Drug Mart president and chief executive officer Domenic Pilla said in a statement. "In what remains a highly competitive and challenging marketplace, it is clear that our value proposition and unwavering commitment to provide the best in patient care and customer service continues to resonate with patients and customers alike."

The acquisition by Loblaw is expected to be completed before the end of the calendar 2014 first quarter.

"While the transaction must still be reviewed and approved by the Competition Bureau, we look forward to the conclusion of this process and the resultant combination of Canada's leading food and pharmacy retailers," Pilla commented.

For the full 2013 fiscal year, Shoppers Drug Mart reported sales of about $11.06 billion, up 2.6% from $10.78 billion in fiscal 2012. Comparable-store sales rose 1.9% for fiscal 2013.

Pharmacy sales rose 2.5% to about $5.23 billion in 2013 and gained 1.3% on a same-store basis. For 2013, pharmacy sales accounted for 47.3% of total sales, unchanged from the prior year.

Prescription count gained 6.1% and was up 4.8% on comp-store basis in 2013. Average prescription value at retail fell 3.8%. Generics comprised 61.5% of prescriptions filled for 2013, up from 59.2% in 2012.

Front-end sales increased 2.6% to $5.83 billion in 2013. Same-store sales in the front end grew 2.5% for the year.

Fiscal 2013 net earnings were $602 million, or $2.99 per diluted share, compared with $606 million, or $2.91 cents per diluted share, in 2012. The 2013 full-year earnings reflect third- and fourth quarter transaction costs of $17 million from the pending acquisition of the company by Loblaw. Excluding those charges, 2013 adjusted net income totaled $614 million, or $3.05 per diluted share, compared with $620 million, or $2.97 per diluted share, in 2012. The share repurchase program lifted 2013 EPS, since there were 3.4% fewer diluted shares outstanding versus 2012.

Analysts, on average, had forecast Shoppers Drug Mart's 2013 adjusted EPS at $2.97, according to Zacks.

For the 2013 fiscal year, Shoppers Drug Mart opened 29 new drug stores, including 11 relocations, and expanded 19 stores. The retailer also acquired 10 drug stores, three of which were consolidated with existing stores, and one long-term care pharmacy. Eight smaller drug stores also were consolidated or closed, and three outpatient hospital pharmacies were closed. The company, too, relocated one Shoppers Home Health Care store during the year.

At the end of 2013, Shoppers Drug Mart had 1,377 stores overall, including 1,309 drug stores (1,253 Shoppers Drug Mart/Pharmaprix stores and 56 Shoppers Simply Pharmacy/Pharmaprix Simplement Santé stores), 62 Shoppers Home Health Care stores and six Murale luxury beauty stores.