January 6, 2012 / 12:27 PM / in 6 years

Jean Coutu profit rises on higher sales

(Reuters) - Jean Coutu Group Inc’s (PJCa.TO) quarterly profit rose, helped in part by higher sales at the Canadian drugstore chain, even though prescription drug reforms have cut generic prices.

The company, which operates nearly 400 franchised stores in the provinces of Quebec, New Brunswick and Ontario, said once more on Friday that an increasing percentage of prescriptions filled by generics and price reductions had a “deflationary impact” on its results.

Even so, National Bank Financial analyst Vishal Shreedhar said the prescription results were stronger than expected.

“They are managing to overcome these reforms, both on a profitability basis and a sales basis,” he said in an interview. “These are good results. They’re not astounding, but they’re good.”

Shreedhar said Jean Coutu has benefited from growing prescription demand driven by an aging population in Quebec, home to most of its pharmacies.

Legislation in Ontario and other provinces has brought down the price of generic prescription drugs in the past few years, putting pressure on Jean Coutu and its competitors, such as Shoppers Drug Mart Corp SC.TO.

Generics rose to 57.2 percent of prescriptions filled by Jean Coutu during the quarter, compared with 55 percent a year earlier, and sales by the company’s generic drug manufacturing subsidiary fell to C$37.1 million, from C$42 million.

Asked on a conference call about the holiday shopping period and the competitive environment, Chief Executive François Coutu was upbeat.

“We’ve had a favorable winter so far. The mood is not depressed, to be honest with you,” he said. “We are not going to see a major competitor coming into the market (in 2012) but in 2013 - we’ll get prepared for that.”

U.S. retailer Target Corp (TGT.N) plans to open its first Canadian stores in the spring of 2013.

Jean Coutu’s net profit for the quarter ended November 26 rose to C$51.7 million ($50.62 million), or 23 Canadian cents a share, from C$48.8 million, or 21 Canadian cents, a year ago.

Revenue at the Longueuil, Quebec-based company, rose 2.8 percent to C$700.1 million. Sales at established stores, a key measure for retailers, rose 2.6 percent.

Analysts, on average, had expected earnings of 22 Canadian cents a share on revenue of C$682.10 million, according to Thomson Reuters I/B/E/S.

($1=$1.02 Canadian)

Reporting by Allison Martell in Toronto and Maneesha Tiwari in Bangalore; editing by Frank McGurty and Rob Wilson

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