Beauty, health now drive profits at drugstore chain

Shoppers Drug Mart Corp.'s new one-stop-shopping format helped drive a 16 per cent increase in second-quarter profit with strong sales tallied right across the country, Canada's largest drugstore chain said yesterday.

Shoppers said net earnings were $80 million, or 37 cents per share, for the quarter ended June 18, compared with $69 million, or 32 cents a share, a year ago.

Revenue increased to $1.62 billion from $1.49 billion.

"Across the board we had good growth," chief executive Glenn Murphy said during a conference call, noting that gains were made in health, beauty and convenience categories.

The results were in line with an analyst forecast of 37 cents per share on revenue of $1.61 billion, according to Thomson Financial.

Sales at stores open a year or more increased 5.2 per cent, which analyst Irene Nattel of RBC Capital Markets called "very impressive."

Prescription sales jumped 9 per cent to $764 million, accounting for nearly half of the sales mix.

Front-of-store sales, which include cosmetics and over-the-counter medications, rang up $860 million.

Reduced interest expense and a lower income tax rate also underpinned the growth in net earnings for Shoppers, which has 927 Shoppers and Pharmaprix drugstores and 51 Shoppers Home Health Care outlets.

Murphy said the retailer plans to expand by building more stores and remodelling more than one-quarter of its shops to conform with a revamped prototype that exceeds 10,000 square feet.

Those stores, which will total 270 by the end of 2005, feature expanded beauty boutiques, healthy-living centres, convenience groceries and digital photo services.

"We have about a dozen to 15 stores that have full-time and part-time nutritionists in them, something we have been experimenting with," Murphy said.

During the second quarter, 18 drugstores were opened or acquired and three closed. The company also added two home health-care stores.