Coutu Q3 profit beats estimates
Jean Coutu, chairman and founder of the Jean Coutu Group Inc., smiles in Longueuil, Que., on July 5, 2011. CANADIAN PRESS/Graham Hughes
LONGUEUIL, Que. - The Jean Coutu Group (PJC) Inc. (TSX:PJC.A) reports it had $62.5 million of net income in its fiscal third quarter, an increase from $56.2 million a year earlier and better than analyst estimates.
Coutu's profit equalled 30 cents per share, up from 26 cents per share a year earlier.
That was two cents per share above analyst estimates.
However, the Quebec-based pharmacy chain's revenue was below estimates, falling to $712.5 million from $716.6 million.
Jean Coutu was expected to earn 28 cents per share with $724.3 million of revenues during the third quarter of fiscal 2014, according to Thomson Reuters estimates.
There's been speculation about Jean Coutu's next move in response to the pending $12.4-billion takeover of Shoppers Drug Mart (TSX:SC) — Canada's largest pharmacy chain by Loblaw (TSX:L).
A statement by president and CEO Francois Coutu and an outlook provided by the company with the third-quarter results on Thursday provided few details about its coming financial targets but both noted the competitive pressures facing the company.
The results of the third quarter "highlight the performance of our organization since the operating income and the profit per share recorded a significant increase" inspite of the competitive market and restrictive regulatory context, Francois Coutu said in his statement.
"Our priority over the coming months will consist to continue the implementation of dynamic strategic initiatives that will contribute to increase sales, pursue our growth and maintain our leadership."
The company's outlook said demographic trends are expected to contribute to the growth in consumption of prescription drugs and that the company will continue to grow revenue.
"The growth in the number of generic drugs' prescriptions, with lower selling prices than the branded drugs, will however have a deflationary impact on retail sales in the pharmacy section but the volume increase in the generic drugs operating segment will have a positive impact on the consolidated margins," the outlook said.
There are three major franchise systems in Quebec — Jean Coutu, Pharmaprix, the Quebec division of Shoppers Drug Mart Corp., and Brunet, which belongs to Montreal-based Metro Inc. (TSX:MRU) — as well as three major co-operatives — Uniprix, Familiprix and Proxim.
Metro will become the exclusive owner and operator of 18 pharmacies at Target stores in Quebec.
Jean Coutu, which operates Quebec's largest pharmacy chain, has said it's considering smaller-scale acquisitions.
Irene Nattel of RBC Capital Markets expects Jean Coutu will grow by three to four per cent annually by building new locations and acquisitions in new markets or where its presence is smaller.
The Jean Coutu Group operates a network of 411 franchised stores in Quebec, New Brunswick and Ontario under the banners of PJC Jean Coutu, PJC Clinique, PJC Sante and PJC Sante Beaute.
It also owns Pro Doc Ltd, a Quebec-based subsidiary and manufacturer of generic drugs.
Jean Coutu also said it plans to spend nearly $190 million to build a new, larger headquarters and distribution centre in Varennes, Que.
It has returned $502 million to shareholders by spending $407 million to repurchase 22 million of its shares at $18.50 per share, and paying $95 million for a one-time cash dividend of 50 cents per share. The shares purchased represented 20.5 per cent of outstanding shares and included 18.15 million controlled by The Marcelle and Jean Coutu Foundation, a trust controlled by the company founder and his family that is used for philanthropic goals.
Following the share buyback, the Jean Coutu Group has 85.5 million Class A shares outstanding and 104 million Class B multiple voting shares.