Shoppers Drug Mart Corp. says its second-quarter sales were up 2.6% from the same time last year, rising in line with expectations to nearly $2.5 billion.
The retailer’s net income was $146 million, including the cost of closing two stores. Adjusted net income without the closures was $149 million, up 4.4% from the same time last year and a penny ahead of estimates.
The adjusted profit excluded a $5-million pre-tax charge from the closure of two stores.
The Toronto-based pharmacy operator said stores open at least a year saw their sales rise by 2.2% on average.
“We are pleased with our second quarter operating and financial results,” said Domenic Pilla, president and CEO of Shoppers Drug Mart.
“This performance speaks to the strength of our value proposition in what remains a challenging economic environment.”
“It is also a testament to the quality of our people, including our associate-owners and their teams at store level, as they continue to execute on our strategic priorities and initiatives in order to mitigate the impact of regulatory reforms on our business.”
The country’s largest drug store chain has said it expects to face continued challenges from the impact of generic drug reforms that will erode pharmacy sales.
Changes last year in Ontario, Quebec and British Columbia have cut generic drug prices to 25% of the price of patented drugs – down from 50% – by cutting professional allowances, a move that Shoppers said would cost an estimated $750-million a year in revenue.
More recent changes in Ontario that further cut the costs for the top 10 generic drugs to 20% of the price of the branded equivalent could hit Shoppers even harder in coming quarters.
Other hurdles the chain faces include potential challenges in other provinces following an Ontario Court of Appeal ruling in December that backed a ban on pharmacies substituting their own brands of prescription drugs for name brands.
The company already sells its Sanis brand generic drugs in most of its key markets, including B.C., Quebec and Alberta. However the retailer has not been selling the Sanis drugs in Ontario, where Shoppers has roughly half of its stores.
Shoppers also could face stiffer competition from two major U.S. companies, retail giant Target and California health-care giant McKesson Corp., who are looking to establish a substantial presence in Canada’s drug store market.
