SHOPPERS DRUG MART CORPORATION ANNOUNCES FIRST QUARTER RESULTS
Apr 27, 2011
- STRONG SALES GROWTH
- DECLARES QUARTERLY DIVIDEND OF 25 CENTS PER SHARE
- SELECTS NEW CHAIR AND CHANGES COMPOSITION OF BOARD COMMITTEES
TORONTO, April 27 /CNW/ - Shoppers Drug Mart Corporation (TSX: SC) today announced its financial results for the first quarter ended March 26, 2011.
First Quarter Results (12 Weeks)
First quarter sales were $2.347 billion, an increase of 2.7% over the same period last year, driven by strong front store sales growth in all regions of the country. On a same-store basis, total sales increased 2.0% during the quarter.
Prescription sales were $1.150 billion in the first quarter, a decrease of 0.4% on both a total and a same-store basis when 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. The decrease in average prescription value can be largely 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. During the first quarter of 2011, total prescription counts increased 3.9% when compared to the same period last year and were up 3.7% on a same-store basis. Generic molecules represented 56.6% of prescriptions dispensed in the first quarter of 2011 compared to 53.2% of prescriptions dispensed in the same period last year. In the first quarter of 2011, prescription sales accounted for 49.0% of the Company's sales mix compared to 50.6% of the Company's sales mix in the first quarter of last year.
Front store sales were $1.197 billion in the first quarter, an increase of 6.0% when compared to the same period last year. On a same-store basis, front store sales increased 4.4% during the quarter. Effective marketing campaigns, differentiated and impactful promotions and solid program execution at store level drove sales growth and market share gains in the Company's core health, beauty and convenience categories.
First quarter net earnings were $118 million or 54 cents per share (diluted) compared to adjusted net earnings of $114 million or 52 cents per share (diluted) in the first quarter of 2010. Adjusted net earnings for the first quarter of last year exclude a gain on disposal of $12 million (pre-tax) in respect of a 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 quarter of 2010 were $122 million or 56 cents per share (diluted). During the first quarter of 2011, 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 certain jurisdictions of Canada. Also, the benefits realized from further gains in productivity and efficiency were partially offset by increased amortization and higher operating expenses at store level associated with the Company's network growth and expansion initiatives, and by continued investments in pricing and promotional activities. Net earnings for the first 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 quarter, David Williams, Director and Interim President and CEO stated, "We are pleased with our performance in the first quarter of 2011. This is a particularly solid result considering that we are in the midst of working through a difficult period of transition as we adjust our business and service model in response to government reform initiatives and the resultant funding and reimbursement pressures on our pharmacy business. Together with our Associate-owners and their teams at store level, we remain well-positioned to meet the challenges and capitalize on the opportunities ahead of us without ever compromising on our commitment to excellence in patient care and customer service."
Store Network Development
During the first quarter of 2011, 18 drug stores were opened or acquired, 11 of which were relocations, and three smaller drug stores were closed. The Company also completed four major drug store expansions during the quarter. In addition to this activity, 12 existing drug stores were remodeled, converting them to smaller prototype formats. At quarter-end, there were 1,316 stores in the system, comprised of 1,245 drug stores (1,185 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 12.8 million square feet at the end of the first quarter of 2011, an increase of 4.9% 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 July 15, 2011 to shareholders of record as of the close of business on June 30, 2011.
Board of Directors
The Company also announced today a number of changes to the roles of various members of its Board of Directors. These changes are effective May 1, 2011 and are consistent with the Company's previously disclosed intention to periodically rotate duties among board members.
Holger Kluge has been selected to succeed David Williams as the non-executive Chair of the Board. Mr. Kluge, an independent director who joined the Board in February 2006, has served as Chair of the Audit Committee since May 2006. Mr. Williams, an independent director who joined the Board in September 2003 and has served as the non-executive Chair since February 2007, will continue to serve as a director and has been appointed to the Nominating and Governance Committee.
Coincident with these changes, the Company also announced that M. Shân Atkins, an independent director who joined the Board in July 2005, has been appointed Chair of the Audit Committee and, accordingly, will no longer serve as a member of the Nominating and Governance Committee; that the Honourable David R. Peterson, an independent director who joined the Board in February 2006, has been appointed to the Audit Committee and, accordingly, will no longer serve as Chair of the Nominating and Governance Committee; that Krystyna Hoeg, an independent director who joined the Board in February 2006 and who has been serving as a member of the Nominating and Governance Committee, has been appointed Chair of the Nominating and Governance Committee; and, that Gaëtan Lussier, an independent director who joined the Board in February 2007, has been appointed to the Nominating and Governance Committee and, accordingly, will no longer serve as a member of the Audit Committee.
Commenting on these changes at the Board level, Mr. Kluge stated, "It is an honour and a privilege to be selected as David Williams' successor as Chair of the Board of Shoppers Drug Mart Corporation, Canada's leading health, beauty and convenience retailer. On behalf of our shareholders, I would like to thank Dave for his value driven leadership, effective governance and many contributions to the continued growth and success of the Company while he served as Chair. I am delighted that Dave will continue to serve the Company and its shareholders as Interim President and CEO until a successor has been appointed and as a director and a member of the Nominating and Governance Committee."
The Company will hold an analyst call at 3:00 p.m. (Eastern Daylight Time) today to discuss its first 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 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 May 11, 2011. The call playback can be accessed after 5:00 p.m. (Eastern Daylight Time) on Wednesday, April 27, 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 1,185 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, 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 risk factors and not place undue reliance on the forward-looking information and statements. Further information regarding these and other risk 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. 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 first quarter of 2011 management's discussion and analysis and unaudited interim consolidated financial statements, please access the following links:
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