Takeover target Shoppers Drug Mart Corp. reported a 6-per-cent bump in per-share second quarter profits, a trend that the company says bodes well for the rest of the year.
"Our efforts thus far have us well positioned going into the back half of the year in what remains a challenging economic, competitive and regulatory environment," Domenic Pilla, Shoppers president and chief executive officer, said in a conference call with analysts Thursday.
Shoppers officials would not answer questions about the $12.4-billion takeover by Loblaw Cos., saying only that their franchise owners are very excited about the deal.
The call instead focused on the second-quarter results, which saw the pharmacy chain post $2.54-billion in sales, a 3.3-per-cent increase over the same period last year.
A majority of those sales, $1.3-billion, came from "front of store" items such as cosmetics, food and health products, while the remaining $1.2-billion came from pharmacy sales – an increase 3.6 per cent and 3.1 per cent, respectively.
However, both categories were under quite a bit of pressure, Mr. Pilla said.
Poor weather put a damper on sales of items such as sunscreen, which are normally a big seller in the second quarter. And while the retail market has been relatively flat, competition has been anything but, with major U.S. retailers such as Target Corp. making inroads in Canada.
Minneapolis-based Target, which opened its first Canadian store in the spring, has plans to open 124 stores on this side of the border by the end of this year. That increased competition, Mr. Pilla noted, and "very value-conscious and price-sensitive" consumers are putting downward pressure on prices.
On the pharmacy side, while sales growth remains strong, provincial efforts to cut the price of generic drugs – which made up 61.3 per cent of Shoppers prescriptions in the second quarter – pushed prescription value at retail down 4.2 per cent.
Net earnings for the quarter ended June 15 were $147-million compared with $145-million in the same period last year and same-store sales increased 2.0 per cent during the quarter. On a per-share basis, earnings were 73 cents, up from 69 cents last year.
The company's share buyback program helped lift per-share earnings in the quarter, but there will not be any more buybacks this year, chief financial officer Brad Lukow said.
Shoppers is also looking to tap into expand specialized care through its MediSystem Pharmacies that provide specialized care for long-term care and retirement communities.
With provinces such as Alberta changing regulations to allow pharmacists to extend prescriptions, prescribe medicine for minor ailments and administer vaccines, Mr. Pilla sees more room for Shoppers Drug Mart to expand market share in the area of professional services.