Corporate revenue lifted by overall market growth, retail expansion

LONGUEUIL, Quebec — Gains in the pharmacy offset slow front-end business to lift sales for Jean Coutu Group’s retail store network in the fiscal 2016 second quarter.

Jean Coutu said Wednesday that for the second quarter ended Aug. 29., revenue for the franchised store network rose 2.6% to nearly $1.034 billion (Canadian) from about $1.008 billion a year earlier. Sales grew 2.9% in the pharmacy and 1.2% in the front of the store.

Same-store sales for the franchised stores in the quarter were up 2% year over year, reflecting gains of 2.5% in the pharmacy and 0.4% in the front end. Prescription count increased 2.7% overall and 2.4% on a comparable pharmacy basis.

During the second quarter, generic drugs reached 70% of prescriptions filled, compared with 68.1% a year ago. Jean Coutu said the introduction of new generics, which have lower selling prices, reduced pharmacy’s retail sales growth by 1.2%, while generic drug price reductions trimmed the growth of those sales by another 0.3%.

Sales of over-the-counter drugs, which accounted for 8.2% of total retail sales in the quarter, increased by 1.1%, compared with a 1% gain in the prior-year period.

The franchise network opened three stores, including one relocation, in the second quarter. Also, one store was expanded and another was closed. As of Aug. 29, Jean Coutu’s retail network encompassed 417 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 topped 3.21 million, up from almost 3.14 million a year earlier.

“Throughout the second quarter, we have continued to implement our business plan efficiently, which helped us report an increased operating income in spite of a challenging regulatory context and a still highly competitive environment,” Jean Coutu Group president and chief executive officer François Coutu said in a statement. “We remain committed to focus on dynamic strategies in order to meet our objectives and sustain our growth.”

On the corporate side, Jean Coutu Group saw revenue come in at $686.6 million for the fiscal 2016 second quarter, up 1.8% from $674.4 in the year-ago period. The company attributed the gain to overall market growth and the expansion of the franchised store network, despite the deflationary impact of increased generic drug sales and generic drug price cuts.

Jean Coutu’s income consists of sales plus other revenue from franchising activities in Canada, with merchandise sales to franchisees through its distribution centers representing most of the company’s sales.

Net earnings for the second quarter totaled $53.8 million, or 29 cents per share, compared with $53.6 million, or 28 cents per share, a year earlier. The earnings-per-share result was in line with the consensus analyst estimate of 29 cents, according to Zacks Investment Research.

Operating income before amortization (OIBA) was $81.7 million for the quarter, up from $81 million a year ago.

Gross sales for Pro Doc, Jean Coutu’s generic drug business unit, totaled $49 million for the second quarter (net of intersegment eliminations) compared with $48.1 million in the prior-year period.