CEO says franchise network sales rose 'markedly' during quarter
The Canadian drug chain said Tuesday that for the first quarter ended May 30, sales for the franchised store network rose 4.4% to nearly $1.063 billion (Canadian) from $1.018 billion a year earlier. Sales were up 4.7% in the pharmacy and 3.4% in the front end. Sales of nonprescription drugs, which accounted for 8.8% of total retail sales, increased 4.4% during the quarter, compared with a 0.1% in the prior-year period.
Same-store sales for the franchise network in the first quarter grew 3.8% year over year, reflecting gains of 4.25 in the pharmacy and 2.7% in the front end.
Prescription count for the franchised stores increased by 3.2% overall during the quarter and by 2.8% on a comparable-pharmacy basis. Generic drugs reached 69.1% of prescriptions filled in the quarter versus 67.8% a year earlier, which had a deflationary impact on retail pharmacy sales, Jean Coutu noted. Introductions of new generics negatively impacted retail pharmacy sales by 1.1% in the quarter, while generic drug price cuts reduced pharmacy sales growth by 0.4%, the company said.
“Network retail sales increased markedly during the first quarter of fiscal 2016, despite an ongoing competitive environment, which reflects a successful implementation of our marketing strategies,” Jean Coutu Group president and chief executive officer François Coutu said in a statement. “We will continue to dedicate the necessary efforts to reach the objectives we have set, and therefore, sustain our long-term growth.”
During the first quarter, the retail network had two store openings, including one relocation, and one store was closed. In addition, five stores were significantly renovated or expanded. As of May 30, the company operates a network of 416 franchised stores in Quebec, New Brunswick and Ontario under the PJC Jean Coutu, PJC Clinique, PJC Santé and PJC Santé Beauté banners.
On the corporate side, Jean Coutu Group saw revenue rise 3.5% to $712.4 million for the fiscal 2016 first quarter from $688.6 million a year earlier. The company said the gain was driven primarily by the market growth and expansion of the PJC network of franchised stores.
Jean Coutu’s income consists of sales plus other revenue from franchising activities in Canada, with merchandise sales to franchisees through its distribution centers accounting for most of the company’s sales.
Net earnings for the first quarter totaled $50.6 million, or 27 cents per share, compared with $54.1 million, or 29 cents per share, in the year-ago period. Jean Coutu noted that the decrease stems mainly from a tax provision of $4.7 million recorded during the 2016 quarter, following a judgment rendered by the Quebec Court of Appeal. The consensus analyst forecast was for earnings per share of 28 cents, according to Zacks Investment Research.
Operating income before amortization (OIBA) edged up 1.2% to $83 million in the first quarter from $82 million a year ago. The company noted that the gain came despite the deflationary impact of the increased volume of generic drugs during the quarter.