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Shoppers Drug Mart is taking a haircut at the hands of the Ontario government, and is expected to take another trim from investors on Thursday, as markets comes to grips with the prospect of a less profitable sector.

Shoppers and other drug story chains will see their pharmacy reimbursements chopped in Ontario as part of a government campaign to rein in health care spending. The pharmacies lobbied against the cuts, but lost that battle.

With diminished profits on the horizon, analysts such as top-ranked Perry Caicco at CIBC World Market moved Thursday to slash the taget price on Shopper's stock, traditionally a star among retail plays. Mr. Caicco now has a $43 one-year target on Shoppers' stock, down from $47.

Looking past Shopper's situation in Ontario, Mr. Caicco said: "It is possible that other regimes could adopt similar reimbursement tactics and that SC's store growth plans could slow."

" It is difficult to forecast earnings with any precision since the battle is not over, some details are uncertain and the timing is unknown," said Mr. Caicco. "So earnings forecasts should be considered as the center-point of ranges rather than exact numbers."

When it comes to future profits, CIBC World Markets forecasts that in 2010, Shoppers will make $2.92 a share, down from a previous prediction of $2.96, as Ontario's new regime takes affect in the final quarter of the retailer's fiscal year. In 2011, Shoppers profit is expected to be $2.84 - down from Mr. Caicco's previous estimate of $3.25.

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Tickers mentioned in this story

Study and track financial data on any traded entity: click to open the full quote page. Data updated as of 27/03/24 4:00pm EDT.

SymbolName% changeLast
CM-N
Canadian Imperial Bank of Commerce
-0.46%50.07
CM-T
Canadian Imperial Bank of Commerce
+0.67%67.9

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