Pharmacy posts double-digit revenue, same-store sales gains

VARENNES, Quebec — Double-digit gains in the pharmacy hoisted Jean Coutu Group’s retail store network sales in the fiscal 2018 first quarter.

Jean Coutu said Tuesday that for the first quarter ended June 3, 2017, sales in the franchised store network totaled $1.15 billion (Canadian), up 7% from $1.08 billion a year earlier. Revenue rose 1.9% in the front end and 10% in the pharmacy.

Same-store sales in the quarter climbed 6.8% year over year, reflecting increases of 1.4% in the front end and 10.1% in the pharmacy. Sales of nonprescription drugs, which accounted for 8.5% of overall retail sales, grew by 2.2% versus 3.9% a year ago.

Jean Coutu noted that the Ministry of Health and Social Services’ cancellation of periodical withdrawals on pharmacists’ fees lifted pharmacy retail sales by 5.7% during the first quarter. The withdrawals, originally slated to continue until 2019, were abolished in April.

Also in the first quarter, the introduction of new generic drugs shave pharmacy retail sales growth by 0.6%, while generic drug price reductions trimmed pharmacy sales by another 0.5%. Generic drugs represented 71.6% of prescriptions in the quarter, compared with 70.7% a year earlier.

Jean Coutu’s retail network opened three stores, including two relocations, in the first quarter. The pharmacy retailer ended the period with 419 franchised stores under the banners PJC Jean Coutu, PJC Santé and PJC Santé Beauté in Quebec, New Brunswick and Ontario.

“During the first quarter, we continued to implement our business plan efficiently, which resulted in a significant increase in retail sales despite an ongoing competitive environment,” Jean Coutu Group president and chief executive officer François Coutu said in a statement. “The development of dynamic initiatives will continue to be our priority over the next few quarters in order to contribute to the increase of retail sales and thus continue our growth and maintain our leadership”

On the corporate side, Jean Coutu Group reported first-quarter sales of $750.4 million, up 3.7% from $723.6 million a year earlier. The company attributed the gain to overall market growth, despite the deflationary impact of increased generic prescription volume and generic price reductions.

Jean Coutu’s corporate 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 in the first quarter came in at $45.5 million, or 25 cents per share, compared with $49 million, or 27 cents per share, a year ago. The company said the decline stems mainly from a decreased contribution by its generic drug subsidiary Pro Doc, which saw sales decline 2.7% to $50.1 million in the quarter.

Analysts, on average, had forecast Jean Coutu’s earnings per share at 24 cents for the first quarter, according to Zacks Investment Research.

Operating income before amortization (OIBA) declined 7.1% to $71.5 million in the first quarter. Jean Coutu said Pro Doc’s contribution to OIBA in the quarter fell $15.1 million, following the removal of the ceiling on professional allowances that may be paid by generic manufacturers to pharmacists. OIBA as a percentage of revenue was 9.5%, compared with 10.6% in the prior-year period.