Earnings per share in line with analysts' expectations
VARENNES, Quebec — Jean Coutu Group’s retail network saw sales rise for the fiscal 2017 third quarter, propelled by gains in both the front end and pharmacy.
Jean Coutu’s corporate business also posted increased sales for the quarter, and the company’s adjusted earnings per share (EPS) were in line with analysts’ forecast, despite a decline in net income for the period.
For the third quarter ended Nov. 26, sales for the franchise store network totaled $1.09 billion (Canadian), up 3.9% from $1.05 billion a year earlier. Revenue grew 3.4% in the front end and 4.5% in the pharmacy.
Same-store sales rose 3.6%, reflecting gains of 2.8% in the front end and 4.4% in the pharmacy. Prescription count climbed 3.7% overall and 3.4% on a comparable pharmacy basis.
Sales of nonprescription drugs, which represented 9% of retail sales, rose by 2.8% in the third quarter, compared with 3.9% a year ago. Generic drugs reached 71.4% of prescriptions filled in the quarter versus 69.8% in the prior-year period.
Jean Coutu said deflationary effect of new generic drugs reduced retail pharmacy sales growth by 0.7% for the third quarter. The company added that generic price reductions lowered retail sales 0.3%, and periodic deductions agreed on between the Ministère de la Santé et des Services Sociaux (MSSS) and the Association Québécoise des Pharmaciens Propriétaires” (AQPP) increased the growth of those sales by 2.3%, due to the impact of the retroactive adjustments of the deductions recorded when they were introduced in September 2015.
“During the third quarter, network retail sales and front-end sales of our distribution centers grew strongly, eloquently reflecting the success of our business strategies and the effectiveness of their implementation,” president and chief executive officer François Coutu said in a statement. “We will continue to make the necessary efforts to enhance our offering to drive growth in retail sales and maintain our leadership.”
Jean Coutu Group’ sales in the third quarter edged up 1.9% to $763.7 million from $749.2 million a year earlier. The company attributed the gain to overall market growth and increased sales in the commercial section of its distribution centers. 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.
Third-quarter net earnings came in at $51.2 million, or 28 cents per share, down from $57.8 million, or 31 cents per share, a year ago. However, Jean Coutu Group hit analysts’ consensus EPS estimate of 28 cents for the quarter, according to Zacks Investment Research.
Operating income before amortization (OIBA) fell to $79.9 million for the quarter from $87 million in the year-ago period, mainly due to a lower contribution from the Pro Doc Ltd. generic drug subsidiary, as well as a rise in general and operating expenses such as labor and other expenses related to the transition to the Varennes location, the company said. OIBA as a percentage of revenue ended the quarter at 10.5% compared with 11.6% a year earlier.
During the third quarter, Jean Coutu’s retail network opened three stores, including one relocation, and four stores were closed. Four stores also were significantly renovated or expanded. Overall, the network includes 418 franchised stores in Quebec, New Brunswick and Ontario under the PJC Jean Coutu, PJC Clinique, PJC Santé and PJC Santé Beauté banners.