JCG president predicts turnaround for Rite Aid, retail pharmacy

MONTREAL Jean Coutu Group president Francois Coutu expressed confidence Thursday in the ability of Rite Aid to turn its fortunes around in an interview reported in the Canadian daily The Globe and Mail.

“We’ve offered feedback and advice from the beginning on the integration. These are not easy times, but we have to be patient,” he said during the interview.

JCG, which has a 32 percent stake in Rite Aid following that chain’s acquisition of Brooks and Eckerd, expressed confidence that an increased focus on healthcare spending expected during the U.S. presidential debates ought to reinvigorate pharmacy sales. Coming out of next year’s elections, whosoever is named U.S. president will oversee extended healthcare coverage to a larger portion of the American population, Coutu predicted, and as such will benefit the business of pharmacy.

Canadian shareholders have been expressing concern over JCG’s fiscal dependence on the fortunes of Rite Aid, however JCG executives told analysts that it was too soon to judge the success of the Brooks/Eckerd acquisition in a conference call to discuss second-quarter JCG results ended Dec. 1.

“I realize Rite Aid is going through an integration process—the economy is not extremely strong south of the border—but this is a long-term investment,” Coutu said during the call.

Jean Coutu Group reported neither a growth nor a decline in front-end same-store sales results, though pharmacy same-store sales were up by 9.5 percent. Overall, the Canadian chain’s comparable sales were up 6.1 percent. “Management attributed the weak front end growth to a light cough, cold and flu season; however we believe PJC is also experiencing a slowing in consumer spending consistent with many retailers across North America,” noted UBS Investment Research analyst Vishal Shreedhar in a note published Friday.

JCG revenues increased to $571.5 million (in U.S. dollars), an 8.3 percent increase. JCG recorded a loss of $31 million as part of its share of Rite Aid’s results during Rite Aid’s second quarter of fiscal 2008.

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