* Adjusted earnings C$0.23 vs C$0. 19 a year earlier
* Generics unit sales rise 14 percent
* Same-store sales up 2.6 percent
By Allison Martell
TORONTO, Oct 10 Canadian pharmacy chain Jean
Coutu Group Inc reported a rise in adjusted quarterly
earnings on Wednesday as its generic drug manufacturing
subsidiary, Pro Doc, posted a double-digit gain in sales and
Prescription sales growth at Longueuil, Quebec-based Jean
Coutu and rivals such as Shoppers Drug Mart Corp have
been hurt in recent years by a provincial crackdown on generic
drug prices and reimbursement rules. But Jean Coutu has said Pro
Doc should help boost margins over the long term.
Pro Doc's sales rose 14.0 percent to C$38.3 million ($39.2
million) in its second quarter, ended Sept. 1, and the unit's
contribution to operating income before amortization rose 25.2
percent to C$15.4 million.
"I think Pro Doc was a key strategy for them ahead of the
generic drug legislation changes, and it's definitely been
beneficial for the company," Canaccord Genuity analyst Derek
Dley said, adding that the quarter was broadly in line with his
Ontario bans drugstores from selling their own private-label
generic drugs. Canada's top court has agreed to hear a challenge
to the ban by Shoppers Drug Mart.
Jean Coutu said 61.0 percent of prescriptions were for
generics during its second quarter, up from 57.2 percent in the
same quarter last year.
Sales at established stores, a key measure for retailers,
increased 2.6 percent overall in the quarter, and 1.6 percent
for non-pharmacy, or "front-end" goods.
Dley said the same-store pharmacy sales growth was a bit
stronger than he had forecast, while front-end sales growth at
established stores was weaker than he had expected.
"It's a pretty competitive environment out there, so you
know, I'm not surprised to see it come in a little bit lower,
but it's definitely a little bit weaker than I was expecting,"
Excluding a gain related to Jean Coutu's stake in U.S.
drugstore chain Rite Aid Corp and other items, earnings
rose to C$50.0 million, or 23 Canadian cents a share, compared
with C$44.6 million, or 19 Canadian cents, a year earlier.
Jean Coutu is Rite Aid's biggest shareholder, the legacy of
the Canadian company's 2004 purchase of the Brooks and Eckerd
drugstore chain. In 2007, Jean Coutu sold the U.S. business to
Rite Aid for cash and stock. In April, it sold nearly one
quarter of its stake.
On an unadjusted basis, net profit fell to C$51.2 million,
or 23 Canadian cents a share, from C$66.4 million, or 29
Canadian cents. Revenue rose to C$658.7 million from C$635.2
Analysts, on average, expected earnings of 22 Canadian cents
a share on revenue of C$653.7 million.
Shares edged up 0.2 percent to C$14.56 in early trading on
the Toronto Stock Exchange on Wednesday.