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Shoppers CEO steps down

BY Michael Johnsen

TORONTO — The abrupt departure of Shoppers Drug Mart president and CEO Jürgen Schreiber announced Wednesday is expected to negatively impact the company’s stock — many investors bought into Shoppers on the faith that retail maven Schreiber would return Canada’s largest drug retailer to consistent quarter-over-quarter growth.

“Schreiber’s departure could be a concern for some investors [for two reasons],” UBS analyst Vishal Shreedhar wrote in a note published Thursday morning. “A CEO exit during a period of earnings volatility could cause some investors to question [Shoppers’] current strategy and outlook. … Many shareholders invested in [Shoppers] because of their confidence in Schreiber’s ability to return the company to consistent growth.”

Shreedhar noted that Shoppers still is delivering positive earnings, however, and maintained UBS’ buy rating for the Canadian retailer.

Schreiber’s resignation is effective Feb. 15.

Shoppers immediately inducted a global search for a new CEO. Chairman David Williams will serve as the company’s president and CEO on an interim basis until a replacement is named. Prior to his appointment as chair of the board of directors in February 2007, Williams served as a member of the company’s audit committee from 2003 through 2006. Williams’ retail experience includes 22 years with George Weston and Loblaw Cos., where he held a number of senior executive positions in operations and finance.

In leading this transition, Williams will operate with a structure that will have three of the company’s most senior executives reporting directly to him on an interim basis, Shoppers announced, including Brad Lukow, EVP and CFO; Mike Motz, EVP operations; and Mary-Alice Vuicic, chief administrative officer and EVP human resources.

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NRF welcomes President Obama’s recognition of retail’s role in job creation

BY Allison Cerra

WASHINGTON — The largest retail trade association on Wednesday said that President Obama’s State of the Union address recognized the industry’s role in job creation.

The National Retail Federation said that the president’s "continued support of ‘commonsense safeguards,’" which included support of such proposals as swipe fee limits, "will help retailers innovate and support the consumer spending that is crucial to job creation."

President Obama discussed other proposals that would benefit the retail industry, NRF said. In his speech, the president recommended corporate and individual tax cuts; adoption of free trade agreements that would make it easier for retailers to import merchandise, while helping open markets for U.S. goods; and deficit reduction through cuts in government spending, rather than new taxes that would threaten the recovery, the association said.

"We are anxiously waiting to hear the details, but the tax reform, deficit reduction, trade agreements, reduction in regulations that hamper small business and other initiatives proposed by the president are all examples of how the government can help the private sector create jobs,” NRF president and CEO Matthew Shay said. “As the industry that supports 1-out-of-every-5 U.S. workers, we stand ready to work with the president and Congress to promote initiatives that put Americans back to work.”

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Cash is king and chain drug is on an upswing

BY Michael Johnsen

NEW YORK — The Motley Fool on Tuesday suggested all three national pureplay drug chains were in a better position today than five and three years ago based on a metric called the “cash king margin.”

The metric teases out the amount of free cash flow a company actually can use to monetize shareholder value by paying dividends or buying back stocks. Companies that can create cash king margins (calculated by dividing free cash flow by sales) of more than 10% are the most attractive to investors, the Fool surmised.

Today, Walgreens boasts the highest cash king margin of 4%, followed by CVS (2.7%) and Rite Aid (0.8%). That compares with 5.2%, 1.6% and -0.3% versus a year ago, respectively.

“CVS has offered us the kind of steady increase in cash king margins that we like to see,” the Fool wrote. “Walgreens has also increased its margins nicely from five years ago, but is down more than 1 percentage point from last year. Rite Aid has also grown its margins over the last three years, but its margins are still lower than 1%.”

For the full report, click here.

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