Shoppers Drug Mart reports Q1 results

TORONTO — Shoppers Drug Mart posted a 2.7% boost in first-quarter sales, driven by strong front-store sales gains that benefited from marketing campaigns, promotions and market share gains of the company's core health, beauty and convenience categories.

Front-end same-store sales rose 4.4% during the quarter ended March 26. Sales at the front end were C$1.197 billion ($1.26 billion), up 6% compared with the year-ago period.

Pharmacy same-store sales decreased 0.4%. Prescription sales were C$1.15 billion ($1.21 billion), also a decrease of 0.4%, compared with the year-ago period. Continued growth in the number of prescriptions filled was offset by a reduction in average prescription value, the company stated. The decrease in average prescription value can be largely attributed to a reduction in generic prescription reimbursement rates, the result of recently implemented drug system reform initiatives in certain jurisdictions of Canada, combined with increasing generic prescription utilization rates.

First-quarter sales were C$2.35 billion ($2.48 billion), up 2.7%, compared with the year-ago period. Net earnings were C$118 million ($124 million), or 54 Canadian cents per share, compared with C$114 million (US$120 million), or 52 Canadian cents per share, last year.

"We are pleased with our performance in the first quarter of 2011. This is a particularly solid result considering that we are in the midst of working through a difficult period of transition as we adjust our business and service model in response to government reform initiatives and the resultant funding and reimbursement pressures on our pharmacy business," stated David Williams, director and interim president and CEO.

"Together with our associate owners and their teams at store level, we remain well-positioned to meet the challenges and capitalize on the opportunities ahead of us without ever compromising on our commitment to excellence in patient care and customer service," Williams added.

The company also announced several changes to its board of directors, including the appointment of a new board chair. Effective May 1, Holger Kluge will succeed Williams as the nonexecutive chairman of the board. Kluge, an independent director who joined the board in February 2006, has served as chair of the audit committee since May 2006.

Williams, an independent director who joined the board in September 2003 and has served as the nonexecutive chair since February 2007, will continue to serve as a director and has been appointed to the Nominating and Governance Committee.

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