July 6, 2010 / 11:47 AM / 8 years ago

UPDATE 2-Jean Coutu up on higher profits, no reform plans yet

(Updates with conference call, details)

* Fiscal Q1 EPS C$0.18, in line with consensus view

* Revenues up 3.8 pct at C$642.9 mln

* Awaiting Quebec government drug reform plans

TORONTO, July 6 (Reuters) - Jean Coutu Group (PJCa.TO), said on Tuesday quarterly profit rose 12 percent on steady overall sales growth at its drugstore chain, and its stock jumped as much as 6 percent.

Earnings at the Quebec-based company climbed to C$43.2 million ($41.1 million), or 18 Canadian cents a share, for the its first quarter ended May 29, in line with the consensus forecast, according to Thomson Reuters I/B/E/S.

That compared with a profit of C$38.5 million, or 16 Canadian cents, for the same period a year earlier.

Revenue rose 3.8 percent to C$642.9 million. Sales at stores open at least one year, a key performance measure for retailers, climbed 2.9 percent, compared with 3.9 percent in the same quarter a year earlier.

The company, which operates 370 franchises in Canada — mostly in Quebec — and holds a significant interest in Rite Aid Corp (RAD.N) in the United States, said a mild winter held back same-store growth. Non-prescription or “front-end” sales grew only 1 percent. Over-the-counter cold and cough treatments are typically big sellers at drugstores during the winter months.

The impact of Quebec’s planned drug reforms, requiring generic drug manufacturers to reduce prices, was the focus of the company’s post-earnings conference call.

Jean Coutu “strongly believes that offsetting measures need to be adopted to assist market participants with the transition to lower generic drug prices,” said Chief Executive Francois Coutu.

    The province of Ontario implemented new drug reform rules last week, overhauling the way pharmacies were compensated for dispensing generic drugs as part of its efforts to trim healthcare costs.

    Pharmacy companies have said the changes would cost hundreds of millions of dollars and have threatened to reduce store hours and other services to offset the lost revenue.

    Quebec, where Jean Coutu primarily operates, postponed similar plans until the end of August to consult with manufacturers, distributors and pharmacies.

    Coutu said the company, which also owns generic drug manufacturer Pro Doc Ltd, hopes volume and growth will offset any potential negative impact from cheaper generic drug prices, but said it was premature to speculate further.

    Jean Coutu shares, which have dropped over 10 percent this year, were up 34 Canadian cents, or 4.2 percent, at C$8.52 on the Toronto Stock Exchange.

    ($1= $1.05 Canadian)

    Reporting by Solarina Ho; Editing by Frank McGurty

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