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Jean Coutu Q1 Profit Plunges On Lower Gains

7/9/2013 7:57 AM ET

Canadian drugstore chain Jean Coutu Group (PJC), Inc. (PJC_A.TO) reported Tuesday a profit for the first quarter that plunged from last year, reflecting lower gains from its investments in Rite Aid Corp. (RAD). The company also noted that with its operations and financial flexibility, it is very well positioned to capitalize on the growth in the drugstore retail industry.

"We are satisfied with the results recorded in the first quarter. Operating income showed solid growth in spite of the deflationary impact of generic drugs on pharmacy sales. The pharmacies affiliated to our network still show the best performance of the industry," President and CEO Francois Coutu said in a statement.

The Longueuil, Canada-based company reported net profit of C$108.6 million or C$0.51 per share for the first quarter, sharply lower than C$397.3 million or C$1.81 per share in the prior-year quarter.

Results for the latest quarter include C$54.4 million of gain related to the investment in Rite Aid, while the year-ago quarter includes C$348.0 million of the same gains.

Excluding the gains, adjusted net profit for the quarter was C$54.2 million or C$0.26 per share, compared to C$51.6 million or C$0.24 per share in the year-ago quarter.

Total revenues for the quarter edged up to C$681.6 million from C$681.5 million in the same quarter last year.

This slight increase in revenue was attributable to overall market growth and the expansion of the PJC network of franchised stores, despite the deflationary impact on revenues of the significant volume increase in prescriptions of generic drugs as well as the price reductions of generic drugs, the company noted.

On a same-store basis, the PJC network's retail sales grew by 0.6 percent, pharmacy sales were stable and front-end sales increased by 1.5 percent.

Sales of non-prescription drugs, which represented 8.8 percent of total retail sales, increased by 3.6 percent.

Generic drugs reached 66.0 percent of drugs prescriptions during the latest quarter, compared to 58.8 percent last year. The introduction of new generic drugs negatively impacted pharmacy retail sales growth by 3.3 percent and price reductions of generic drugs negatively impacted the sales by 1.1 percent.

In addition, the board declared a quarterly dividend of C$0.085 per share, payable on August 9 to shareholders of record on July 26, 2013.

With its operations and financial flexibility, the company said it is very well positioned to capitalize on the growth in the drugstore retail industry. Demographic trends are expected to contribute to the growth in prescription drugs' consumption and to the increased use of pharmaceuticals as the primary intervention in individual healthcare.

The company added that these trends will continue and it will maintain its growth in revenues through differentiation and quality of offering and service levels to its network of franchised stores, with a focus on sales growth, its real estate program and operating efficiency.

PJC-A.TO closed Monday's regular trading session on the Toronto Stock Exchange at C$17.81, down C$0.11 on a volume of 0.31 million shares.

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by RTT Staff Writer

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