LONGUEUIL, Quebec — Despite gains in net earnings and operating income, introductions of new generic drugs and price reductions of generics contributed to declined sales in the fiscal 2014 third quarter at Jean Coutu Group.

The Canadian drug chain said Thursday that for the third quarter ended Nov. 30, sales at its franchised store network dipped 0.6% to about $1.013 billion (Canadian) from nearly $1.019 billion a year earlier. Revenue was down 0.8% in the front end and 0.6% in the pharmacy.

Same-store sales for the franchised store network fell 1.3% in the quarter, reflecting decreases of 1.3% in the front end and 1.6% in the pharmacy.

Sales of over-the-counter drugs, which represented 9% of total retail sales, were flat, compared with a gain of 2.2% in the prior-year period, according to Jean Coutu Group.

Prescription count rose 4.5% overall and 4% on a same-store basis in the third quarter.

Generic drugs accounted for 66.7% of prescriptions filled during the 2014 third quarter, compared with 61.8% in the 2013 quarter. Jean Coutu Group noted that the rise in prescriptions filled with generics, which have lower selling prices than brand-name drugs, had a deflationary impact on its retail pharmacy sales. The company reported that new generics reduced pharmacy retail sales growth by 1%, while generic drug price reductions, stemming from health reforms, also pared the growth of those sales by 1%.

Jean Coutu Group said that the franchise network opened four stores, including two relocations, in the third quarter and remodeled or expanded six locations. Overall, the network has 413 stores in Quebec, New Brunswick and Ontario under the banners PJC Jean Coutu, PJC Clinique, PJC Santé and PJC Santé Beauté.

On the corporate side, fiscal 2014 third-quarter revenue for Jean Coutu Group came in at $712.5 million, down about 0.6% from $716.6 million in the 2013 quarter. The company attributed the decline mainly to the deflationary impact of new generic medications and generic drug price cuts.

Jean Coutu Group’s income consists of sales plus other revenue derived from franchising activities in Canada. Merchandise sales to franchisees through its distribution centers account for most of the company’s sales. 

Operating income before amortization (OIBA) in the third quarter climbed by 3.4% to $88 million from $85.1 million a year earlier. The company said the gain stemmed primarily from a strong operational performance by its Pro Doc Ltd. generic drug business. OIBA as a percentage of revenue was 12.4% in the 2014 third quarter, compared with 11.9% in the year-ago period.

Net profit totaled $62.5 million, or 30 cents per share, in the 2014 third quarter versus $56.2 million, or 26 cents per share, in the 2013 quarter. Jean Coutu Group noted that basic profit per share would have been 33 cents for the 2014 quarter excluding shares repurchased in the course of the substantial issuer bid completed in November 2013. 

"The results of the third quarter of fiscal 2014 highlight the performance of our organization since the operating income and the profit per share recorded a significant increase in spite of a growingly competitive environment and a restrictive regulatory context," François Coutu, president and chief executive officer of Jean Coutu Group, said in a statement. "Our priority over the coming months will consist to continue the implementation of dynamic strategic initiatives that will contribute to increase sales, pursue our growth and maintain our leadership."