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Shoppers reports marginal Q2 profit growth, helped by front-end store sales

Published: 14:59 21 Jul 2011 EDT

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Shoppers Drug Mart Corp (TSE:SC) said Thursday that second quarter profit rose just over one percent, driven by increased front store sales, as prescription sales fell.

For the three months ending June 18, the Canadian drug store chain reported net earnings of $147.9 million, or 68 cents per share, compared to $146.0 million, or 67 cents per share, a year earlier.

Analysts expected 67 cents per share, according to Thomson Reuters.

Second quarter sales increased 1.4% to $2.39 billion, driven by growth in the front of store sales, which includes items like over the counter meds, cosmetics and food, in all regions of the country. Comparable sales, or those of stores open at least a year, increased 0.8% during the period.

Prescription sales declined 1.0% to $1.15 billion, as growth in the number of prescriptions filled was offset by lower average prescription value.

The company said the decline was attributed to a reduction in reimbursement rates for generic prescriptions, the result of recently implemented drug system reform initiatives in certain jurisdictions of Canada, principally Ontario, British Columbia, Alberta and Québec.

Generic drugs also represented more than 56% of prescriptions dispensed in the quarter, compared to 52.5% a year ago. On a same-store basis, precription sales dropped 0.8%.

Meanwhile front-end store sales were $1.24 billion, reflecting 3.8% year-over-year growth, driven by strengh in over the counter meds, cosmetics, and food and confection sales. Same store front sales rose 2.4% during the latest quarter.

"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," said interim president and CEO, David Williams.

"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."

The company said that cost-cutting measures during the quarter helped offset higher amortization and operating expenses at the store level, associated with its network growth and expansion activities, as well as promotional initiatives.

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