(Reuters) - Canadian pharmacy chain Jean Coutu Group Inc PJCa.TO reported a jump in quarterly earnings on Tuesday, helped by the sale of part of its stake in U.S. drugstore chain Rite Aid Corp RAD.N and by higher sales.
Sales and margins at Longueuil, Quebec-based Jean Coutu and competitors such as Shoppers Drug Mart Corp SC.TO have been hurt in the past few years by legislation in several Canadian provinces, including Ontario and Quebec, that has reduced the prices they can charge for generic drugs.
But in Jean Coutu’s fiscal first quarter, ended June 2, sales at established stores, a key measure for retailers, rose 3.4 percent.
“Our network retail sales, in particular those (in) the pharmaceutical section, posted a significant increase despite the price reductions of generic drugs,” said Chief Executive Francois Coutu on a conference call.
The latest wave of generic drug price cuts took effect in early April, but Jean Coutu said they had less impact than previous changes.
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 56 million shares of its 234.4 million share stake in Rite Aid.
The company recorded a gain of C$82.8 million on the sale of Rite Aid shares and an unrealized gain of C$265.2 million on that investment that followed from an accounting change.
Jan Coutu’s quarterly net profit rose to C$397.4 million ($389.7 million), or C$1.81 a share, from C$49.9 million, or 22 Canadian cents, a year earlier.
On an adjusted basis, the company reported a profit of C$51.7 million, or 24 Canadian cents a share. That was in line with analysts’ expectations of 24 Canadian cents, according to Thomson Reuters I/B/E/S.
Revenue for Jean Coutu, which operates about 400 franchised stores in Quebec, New Brunswick and Ontario, rose 3.2 percent to C$681.5 million.
Generic drugs accounted for 58.8 percent of drug prescriptions sold during the quarter, compared with 56.5 percent a year earlier.
Sales at Jean Coutu’s generic drug manufacturing subsidiary Pro Doc rose to C$37.8 million, from C$35.9 million.
Shares were little changed shortly after the open on Tuesday, trading up 0.1 percent at C$14.76 on the Toronto Stock Exchange.
Reporting by Allison Martell in Toronto and Maneesha Tiwari in Bangalore; Editing by Joyjeet Das; and Peter Galloway