Retail drugstore chain China Nepstar Chain Drugstore Ltd. (NPD) Wednesday reported a decline in profit for the fourth quarter, despite a 10.5% growth in same store sales.
For the fourth quarter, net income attributable to the company's ordinary shareholders dropped to RMB 42.53 million or RMB 0.20 per share from RMB 46.13 million or RMB 0.22 per share last year. Earnings per American depository share was RMB 0.40, down from RMB 0.44 in the prior year.
Quarterly revenue declined to RMB 621.36 million from RMB 655.78 million last year. Nepstar terminated a voting rights agreement, which assigned 30% of the total voting rights of Yunnan JianZhiJia Chain Drugstore Co. Ltd. (JZJ) to Nepstar effective January 5, 2009.
On an adjusted basis, revenue increased 12.8% to RMB 621 million from RMB 551 million last year.
Revenue contribution from prescription drugs was 27.0%, OTC drugs was 36.4%, nutritional supplements was 19.7%. Traditional Chinese herbal products contributed 3.3% and other products, 13.6%. The higher contribution from sales of prescription drugs was mainly due to the surge of antibiotics sales related to the H1N1 epidemic. Same-store sales for the quarter increased by 10.5% from the same period last year, helped by higher level of prescription and OTC drug sales related to the H1N1 epidemic. The increase was also attributable to the company's effective marketing campaigns, streamlining of store operations, further optimization of product mix, as well as the general recovery of the Chinese economy.
Interest income for the quarter dipped to RMB 15.18 million from RMB 26.55 million last year. The decrease in interest income was primarily due to the maturity of a majority of the held-to-maturity investment securities of which the proceeds were placed in bank deposits, a general decrease of interest rates for bank deposits and lower cash balances as a result of the dividend payment.
Sales, marketing and other operating expenses for the period declined to RMB 230.52 million from RMB 237.14 million last year, while general and administrative expenses increased to RMB 25.66 million from RMB 23.40 million last year. During the quarter, the company opened 156 new stores and closed 14 stores. As of December 31, 2009, Nepstar had a total of 2,479 stores in operation.
For the full year, net income attributable to ordinary shareholders dropped to RMB 139.98 million or RMB 0.66 per share from RMB 192.75 million or RMB 0.88 per share last year, mainly due to lower interest income. Earnings per American depository share was down to RMB 1.32 from RMB 1.76 a year ago.
Full year revenue dipped to RMB 2.22 billion from RMB 2.40 billion last year. On an adjusted basis, prior year revenue was RMB 2.01 billion.
Interest income for fiscal 2009 was RMB 75.34 million compared to RMB 121.56 million last year.
Separately, the board has declared an annual cash dividend of US$0.28 per American Depositary Share payable on or around May 3, 2010, to shareholders of record as of the close of business on April 2, 2010.
Looking ahead, Ian Wade, chief executive officer said, "We will be more active in opening and acquiring stores in areas where economic trends are favorable. With more smaller-sized competitors struggling with margin erosion as a result of healthcare reform in China, the consolidation of the fragmented drugstore industry is bound to accelerate. We believe Nepstar is well-positioned to capture opportunities brought by the evolving competition landscape."
NDP shares closed Tuesday's regular trading at $7.26 on the New York Stock Exchange.
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