More room to expand offerings; Profit soars in latest quarter

Shoppers Drug Mart Corp. says it plans to add up to 50 more large format stores this year to its growing network of superstores, giving it more room to add convenience foods, premium cosmetics, seasonal items and new private-label products to its traditional pharmacy sales.

The company, which already owns 844 drug stores across Canada, is also looking to make more acquisitions, Shoppers chief executive officer Glenn Murphy said yesterday.

The country's largest drug store chain said it ended its first year as a publicly traded company on a high note, reporting stronger fourth quarter sales and profits.

It's predicting a similar performance this year.

The Toronto-based company said profit in the quarter jumped fifteen fold to $62 million from $4.2 million, mainly due to a writedown on deferred financing expenses in the previous year and new accounting standards this year.

Excluding those one-time changes, net earnings would have climbed nearly tenfold to $40 million, the
company said.

Sales in the quarter grew 8.7 per cent to $1.39 billion.

Prescription sales increased 10.7 per cent to $612 million, while sales of all other items rose 7.2 per
cent to $782 million.

Sales at stores open more than a year, considered an important measure of retail performance, grew 6.8 per cent, driven mainly by prescription sales.

In the pharmacy industry, same-store sales include sales at stores that were relocated or expanded
during the year, the company said.

For the year, sales rose 8.9 per cent to $5.44 billion, led by prescription sales, which rose 11.5 per cent to $2.51 billion, while sales of all other items increased 6.6 per cent to $2.93 billion. Same store sales rose 7 per cent, with prescription sales up 10.8 per cent and front of store sales up 3.9 per cent.

The drug store chain, which went public last year after New York based leveraged buyout specialists
Kohlberg Kravis Roberts sold part of its stake, has spent the past year focusing on expanding the chain and growing the store size.

The company is also aiming to grab a larger share of the prestige cosmetic business currently
dominated by the department stores, Murphy told a merchandising conference hosted by CIBC World Markets last week.

Shoppers is already a major player in the larger, moderately priced cosmetic business, he noted, but
has only a 1 per cent stake in the smaller, but more profitable, prestige segment.

Shoppers also plans to focus more on its private label products, which still sell well despite more than
a decade of virtual neglect, he said yesterday.

The company plans to relaunch 500 to 600 existing Life Brand products in new packages starting this
fall, and add 100 new product categories, he said. "The Life brand has had no real development for the last 10 years," he said. "We think there's a tremendous opportunity there." The company plans to invest $160 million this year in store expansion, relocation and renovation.