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An eventful quarter for SDM

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BRAMPTON, Ontario — Shoppers Drug Mart (SDM) reported strong financial results for the second quarter despite the impact of incremental health care reform measures and the full effect of changes to Canada’s minimum wage. Canada’s largest drug chain also marked the launch of the country’s largest online beauty destination and some notable store openings since the end of the quarter.

Sales for the 12 weeks ended June 16 grew 1.4% to $2.92 billion (Canadian), driven by a 1.7% rise in same-store sales. The front end provided most of the impetus, as sales gained 2.3% to $1.54 billion, propelled by a 3% increase on a same-store basis.

During a conference call with analysts, Darren Myers, chief financial officer of parent company Loblaw Cos., attributed the robust front-end same-store sales performance to strength in cosmetics and health and beauty aids.

Pharmacy sales edged up 0.4% to $1.38 billion, as a solid 3% increase (2.9% on a same-store basis) in the number of prescriptions dispensed was offset by a 2.6% decrease in the average prescription value. Same-store pharmacy sales ticked up 0.3%.

“In pharmacy, we saw same-store sales growth of 0.3% on strong prescription growth performance, [but] our pharmacy same-store sales [were] negatively impacted by drug reform,” Myers explained.

SDM accounted for 28% of Lob­law’s total retail sales of $10.6 billion, which declined 2.5% year over year. The company attributed the decrease on the sale of Loblaw’s fuel center business and the negative impact of incremental health care reform on the company’s non-SDM pharmacy business.

Both Myers and Loblaw executive chairman and chief executive officer Galen Weston pointed out that it remains unclear how much impact will be felt due to new Canadian tariffs placed on $16.6 billion of U.S. imports, but that some inflationary pressure will probably be felt.

“In addition to the tariffs, we see continued cost pressures going forward from higher transportation costs and a lower Canadian dollar,” Myers said. “Looking forward, we would not be surprised to see upward pressure on prices, given the underlying cost pressures and incremental headwinds noted.”

Loblaw president Sarah Davis enumerated a number of highlights for SDM during the second quarter and since, in both the pharmacy and the front end. “In our Shoppers business we’ve seen good growth in our C Pack, or Compliance Pack, business, automating complex prescription fills and providing patients with simplified packaging that provides convenience, safety and adherence,” she said. “It also frees our pharmacists to focus on higher-value patients’ service and care.”

Davis added that enhanced food sections were added to 20 SDM locations, bringing the chainwide total to 68. The goal is to approach 100 by year-end. “In the stores with the enhanced food offering, we are seeing a fresh item in more than 25% of customer baskets,” she noted.


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