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Jean Coutu records gains in fourth quarter

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LONGUEUIL, Quebec — The Jean Coutu Group posted increases in sales, earnings and operating results for its fiscal 2010 fourth quarter and full year.

The Canadian drug store chain said Wednesday that sales for the fourth quarter ended Feb. 27 rose 4.9% year over year to $637 million (Canadian) from $607.2 million.

Coutu’s revenue encompasses sales plus other revenue from franchising activities in Canada, with merchandise sales to franchisees through its distribution centers representing most of its income. The company attributed the quarterly sales increase to overall market growth and the expansion of its franchise network, which includes stores under the banners PJC Jean Coutu, PJC Clinique, PJC Santé and PJC Santé Beauté.

Overall retail sales for the franchise network came in at $951.3 million (Canadian) in the fourth quarter, up 5.8% from $898.8 million a year earlier, Coutu reported. Sales climbed 6.7% in the pharmacy and 4.4% in the front end. The company noted that sales of nonprescription drugs, which represented 9% of total retail sales, increased by 2.7% in the fourth quarter, down from 5.7% in the same period last year.

Same-store sales for the retail network, meanwhile, grew 3.8%, reflecting increases of 4.8% in the pharmacy and 2.2% in the front end.

On the earnings side, Coutu reported a profit of $42.8 million (Canadian), or 18 cents per share, compared with a loss of $733.6 million or $3.11 per share, a year ago.

According to Coutu, no share of loss in Rite Aid Corp., in which the Canadian retailer holds an interest, was accounted in the company’s 2010 fourth-quarter earnings, compared with a noncash charge of $768.8 million, or $3.26 per share, in the 2009 period.

Earnings before specific items and share of loss in Rite Aid amounted to $42.9 million, or 18 cents per share) during the fourth quarter of 2010 versus $38.5 million, or 16 cents per share, a year earlier, according to Coutu.

Operating income before amortization (OIBA) climbed 15.8% in the fourth quarter to $71.2 million from $61.5 million in the prior-year period. Coutu said the gain stems mainly from a strong operational performance in franchising activities and its Pro Doc subsidiary.

"We are very satisfied with the results of the fourth quarter and fiscal year 2010. We successfully continued the implementation of our business plan, which resulted in a strong growth of the OIBA," François Coutu, president and chief executive officer, said in a statement.

"In the course of the next year, we will continue to build upon our position as a leader in pharmacy," he added, "and we will keep striving to maintain our growth objectives."

Coutu’s retail network opened 22 stores, including five relocations, during fiscal 2010. Also, 41 stores were significantly renovated or expanded, the company said. The network has about 370 franchised stores.

For the 2010 fiscal year, Coutu saw overall sales rise 7.3% to $2.54 billion (Canadian). Retail network sales gained 7% to nearly $3.64 billion, with same-store revenue up 4.5%, and OIBA for fiscal 2010 increased by 15.5% to $268.8 million.

Full year earnings totaled $112.6 million (Canadian), or 48 cents per share, versus a loss of $1.19 billion, or $4.92 per share, in fiscal 2009, which included losses from the company’s stake in Rite Aid.

Earnings before specific items and share of loss in Rite Aid came in at $162.7 million (Canadian), or 69 cents per share, for fiscal 2010, compared with $142.6 million, or 59 cents per share, a year ago.

Coutu noted that during the 2010 fiscal year, its share of loss in Rite Aid exceeded the carrying value of its investment. As required by Canadian GAAP, Coutu reduced the carrying value of its investment to zero and ceased recording its share of loss in Rite Aid exceeding the carrying value of its investment. For the quarter and the fiscal year ended February 27, 2010, Coutu’s unrecognized share of loss in Rite Aid totaled $53.8 million and $89.4 million (Canadian), respectively.


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