Shoppers Drug Mart Corporation announces second quarter results
Jul 21, 2011
TORONTO, July 21, 2011 /CNW/ - Shoppers Drug Mart Corporation (TSX: SC) today announced its financial results for the second quarter ended June 18, 2011.
Second Quarter Results (12 Weeks)
Second quarter sales were $2.394 billion, an increase of 1.4% over the same period last year, driven by sales growth in the front of the store in all regions of the country. On a same-store basis, total sales increased 0.8% during the quarter.
Prescription sales were $1.154 billion in the second quarter, a decrease of 1.0% compared to the same period last year, as continued growth in the number of prescriptions filled was offset by a reduction in average prescription value. On a same-store basis, prescription sales decreased 0.8% during the quarter. During the second quarter of 2011, total prescription counts increased 4.1% compared to the same period last year and were up 4.3% on a same-store basis. The decrease in average prescription value can be attributed to a reduction in generic prescription reimbursement rates, the result of recently implemented drug system reform initiatives in certain jurisdictions of Canada, principally Ontario, British Columbia, Alberta and Québec, combined with increasing generic prescription utilization rates. Generic molecules represented 56.2% of prescriptions dispensed in the second quarter of 2011 compared to 52.5% of prescriptions dispensed in the same period last year. In the second quarter of 2011, prescription sales accounted for 48.2% of the Company's sales mix compared to 49.4% of the Company's sales mix in the second quarter of last year.
Front store sales were $1.240 billion in the second quarter, an increase of 3.8% compared to the same period last year, led by continued strength and sales growth in over-the-counter medications, cosmetics and food and confection. On a same-store basis, front store sales increased 2.4% during the quarter.
Second quarter net earnings were $148 million or 68 cents per share (diluted) compared to net earnings of $146 million or 67 cents per share (diluted) in the second quarter of 2010. Continued strong performance in the front of the store served to partially mitigate the downward pressure on sales and margin dollars in the dispensary as a result of the recently implemented drug system reform initiatives in some provinces of Canada. These results also reflect the benefits of cost reduction initiatives and further gains in productivity and efficiency in identical stores, particularly in the dispensary. This has served to offset increased amortization and higher operating expenses at store level associated with the Company's network growth and expansion initiatives, along with continued investments in pricing and promotional activities. Net earnings for the second quarter of 2011 also benefitted from a reduction in the Company's effective income tax rate, partially offset by an increase in financing expenses.
Commenting on the results, David Williams, Director and Interim President and CEO stated, "As we continue to work through a difficult year of transition in response to government reform initiatives and the resultant funding and reimbursement pressures this has placed on our pharmacy business, we are encouraged by our performance in the second quarter and our results thus far in fiscal 2011. We continue to make the necessary adjustments to our business model without compromising on our commitment to deliver the best in patient care and customer service. Our ability to deliver growth in the context of this environment speaks to the dedication and commitment of our Associate-owners and their teams at store level whose efforts, along with those of our central and regional office employees, have us well-positioned entering the second half of the year."
First Half Results (24 weeks)
First half sales were $4.741 billion, an increase of 2.1% over the same period last year, with prescription sales down 0.7% and front store sales up 4.8%. On a same-store basis, first half sales increased 1.4%, with prescription sales down 0.6% and front store sales up 3.4%. During the first half of 2011, prescription counts increased 4.0% on both a total and a same-store basis compared to the same period last year. Generic molecules represented 56.0% of prescriptions dispensed in the first half of 2011 compared to 52.4% of prescriptions dispensed in the same period last year. In the first half of 2011, prescription sales accounted for 48.6% of the Company's sales mix compared to 50.0% of the Company's sales mix in the first half of last year.
First half net earnings were $265 million or $1.22 per share (diluted) compared to adjusted net earnings of $260 million or $1.19 per share (diluted) in the first half of 2010. Adjusted net earnings for the first half of last year exclude a gain on disposal of $12 million (pre-tax) in respect of a first quarter sale-leaseback transaction involving certain of the Company's retail properties. Including the impact of this gain, the Company's net earnings for the first half of 2010 were $268 million or $1.23 per share (diluted).
Store Network Development
During the second quarter of 2011, 13 drug stores were opened, eight of which were relocations, and one smaller drug store was closed. The Company also completed seven major drug store expansions during the quarter. In addition to this activity, 11 existing drug stores were remodeled, converting them to smaller prototype formats. At quarter-end, there were 1,320 stores in the system, comprised of 1,249 drug stores (1,189 Shoppers Drug Mart/Pharmaprix stores and 60 Shoppers Simply Pharmacy/Pharmaprix Simplement Santé stores), 63 Shoppers Home Health Care stores and eight Murale stores. Retail selling space was approximately 13.0 million square feet at the end of the second quarter of 2011, an increase of 4.2% compared to a year ago.
The Company also announced today that its Board of Directors has declared a dividend of 25 cents per common share, payable October 14, 2011 to shareholders of record as of the close of business on September 30, 2011.
The Company will hold an analyst call at 2:00 p.m. (Eastern Daylight Time) today to discuss its second quarter results. The call may be accessed by dialing 416-695-7806 from within the Toronto area, or 1-888-789-9572 outside of Toronto. The seven-digit participant pass code number is 4054845. The call will also be simulcast on the Company's website for all interested parties. The webcast can be accessed via the Investor Relations section of the Shoppers Drug Mart website at www.shoppersdrugmart.ca. The conference call will be archived in the Investor Relations section of the Shoppers Drug Mart website until the Company's next analyst call. A playback of the call will also be available by telephone until 11:59 p.m. (Eastern Daylight Time) on August 4, 2011. The call playback can be accessed after 5:00 p.m. (Eastern Daylight Time) on Thursday, July 21, 2011 by dialing 905-694-9451 from within the Toronto area, or 1-800-408-3053 outside of Toronto. The seven-digit pass code number is 7034174.
About Shoppers Drug Mart Corporation
Shoppers Drug Mart Corporation is one of the most recognized and trusted names in Canadian retailing. The Company is the licensor of full-service retail drug stores operating under the name Shoppers Drug Mart (Pharmaprix in Québec). With more than 1,189 Shoppers Drug Mart and Pharmaprix stores operating in prime locations in each province and two territories, the Company is one of the most convenient retailers in Canada. The Company also licenses or owns 60 medical clinic pharmacies operating under the name Shoppers Simply Pharmacy (Pharmaprix Simplement Santé in Québec) and eight luxury beauty destinations operating as Murale. As well, the Company owns and operates 63 Shoppers Home Health Care stores, making it the largest Canadian retailer of home health care products and services. In addition to its retail store network, the Company owns Shoppers Drug Mart Specialty Health Network Inc., a provider of specialty drug distribution, pharmacy and comprehensive patient support services, and MediSystem Technologies Inc., a provider of pharmaceutical products and services to long-term care facilities in Ontario and Alberta.
For more information, visit www.shoppersdrugmart.ca.
Forward-looking Information and Statements
This news release, including the Management's Discussion and Analysis, (collectively, the "News Release"), contains forward-looking information and statements which constitute "forward-looking information" under Canadian securities law and which may be material, regarding, among other things, the Company's beliefs, plans, objectives, estimates, intentions and expectations. Forward-looking information and statements are typically identified by words such as "anticipate", "believe", "expect", "estimate", "forecast", "goal", "intend", "plan", "will", "may", "should", "could" and similar expressions. Specific forward-looking information in this News Release includes, but is not limited to, statements with respect to the Company's future operating and financial results, its capital expenditure plans, its dividend and shareholder distribution policies and the ability to execute on its future operating, investing and financing strategies.
The forward-looking information and statements contained herein are based on certain factors and assumptions, certain of which appear proximate to the applicable forward-looking information and statements contained herein. Inherent in the forward-looking information and statements are known and unknown risks, uncertainties and other factors beyond the Company's ability to control or predict, which give rise to the possibility that the Company's predictions, forecasts, expectations or conclusions will not prove to be accurate, that its assumptions may not be correct and that the Company's plans, objectives and statements will not be achieved. Actual results or developments may differ materially from those contemplated by the forward-looking information and statements.
The material risk factors that could cause actual results to differ materially from the forward-looking information and statements contained herein include, without limitation: the risk of adverse changes to laws and regulations relating to prescription drugs and their sale, including pharmacy reimbursement programs and the availability of manufacturer allowances, or changes to such laws and regulations that increase compliance costs; the risk that the Company will be unable to implement successful strategies to manage the impact of the regulations enacted in 2010 in the Province of Ontario to amend the Ontario drug system, along with the impact of the new Pharmacy Services Agreement that came into effect in 2010 in the Province of British Columbia, as well as the impact of the proposed and/or announced drug system reform initiatives in these and other jurisdictions of Canada, principally the provinces of Alberta, Saskatchewan, Québec, Nova Scotia and Newfoundland and Labrador; the risk of adverse changes in economic and financial conditions in Canada and globally; the risk of increased competition from other retailers; the risk of an inability of the Company to manage growth and maintain its profitability; the risk of exposure to fluctuations in interest rates; the risk of material adverse changes in foreign currency exchange rates; the risk of an inability to attract and retain pharmacists and key employees; the risk of an inability of the Company's information technology systems to support the requirements of the Company's business; the risk of changes to estimated contributions of the Company in respect of its pension plans or post-employment benefit plans which may adversely impact the Company's financial performance; the risk of changes to the relationships of the Company with third-party service providers; the risk that the Company will not be able to lease or obtain suitable store locations on economically favourable terms; the risk of adverse changes to the Company's results of operations due to seasonal fluctuations; risks associated with alternative arrangements for sourcing generic drug products, including intellectual property and product liability risks; the risk that new, or changes to current, federal and provincial laws, rules and regulations, including environmental and privacy laws, rules and regulations, may adversely impact the Company's business and operations; the risk that violations of law, breaches of Company policies or unethical behaviour may adversely impact the Company's financial performance; property and casualty risks; the risk of injuries at the workplace or health issues; the risk that changes in tax law, or changes in the way that tax law is expected to be interpreted, may adversely impact the Company's business and operations; the risk that new, or changes to existing, accounting pronouncements may adversely impact the Company; the risks associated with the performance of the Associate-owned store network; the risk of material adverse effects arising as a result of litigation; the risk of damage to the reputation of brands promoted by the Company, or to the reputation of any supplier or manufacturer of these brands; and the risk that events or series of events may cause business interruptions.
This is not an exhaustive list of the factors that may affect any of the Company's forward-looking information and statements. Investors and others should carefully consider these and other factors and not place undue reliance on the forward-looking information and statements. Further information regarding these and other factors is included in the Company's public filings with provincial securities regulatory authorities including, without limitation, the sections entitled "Risks and Risk Management" and "Risks Associated with Financial Instruments" in the Company's Management's Discussion and Analysis for the 52 week period ended January 1, 2011 and for the 12 week period ended March 26, 2011. The forward-looking information and statements contained in this News Release represent the Company's views only as of the date of this release. Forward-looking information and statements contained in this News Release about prospective results of operations, financial position or cash flows that are based upon assumptions about future economic conditions and courses of action are presented for the purpose of assisting the Company's shareholders in understanding management's current views regarding those future outcomes and may not be appropriate for other purposes. While the Company anticipates that subsequent events and developments may cause the Company's views to change, the Company does not undertake to update any forward-looking information and statements, except to the extent required by applicable securities laws.
Additional information about the Company, including the Annual Information Form, can be found at www.sedar.com.
To immediately view and download Shoppers Drug Mart Corporation's second quarter of 2011 management's discussion and analysis and unaudited condensed consolidated financial statements, please access the following links:
For further information:
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