Shoppers Drug Mart revenue up on over-the-counter sales

Shoppers Drug Mart Corp, Canada's biggest pharmacy chain, reported a 4 percent rise in first-quarter revenue as higher over-the-counter sales helped to offset tighter price controls for generics.

The price controls, which were recently tightened, have crimped growth at Shoppers and rivals such as Jean Coutu Group Inc in recent years.

Shoppers Drug Mart's net profit at C$119 million ($117 million), or 59 Canadian cents per share, was in line with analysts' estimates, according to Thomson Reuters I/B/E/S.

"In the context of the current environment and the low confidence around the earnings visibility, an in-line quarter was actually a beat for Shoppers," said analyst Kenric Tyghe of Raymond James.

Canada's provinces and territories agreed in January to tighten caps on prices of six widely prescribed generic drugs to cut costs for private and government health programs. Generic drug prices in Canada are among the highest in the world.

The new rules mandate drugstores charge no more than 18 percent of the price of the brand-name equivalent, lower than the previous 25 percent to 40 percent cap. The rules kicked off on April 1.

Saskatchewan Premier Brad Wall then told Reuters that more could be done to cut the cost of generics.

Shoppers Drug Mart's total sales in the quarter rose 4 percent to C$2.49 billion.

A 4.2 percent rise in front-of-store sales, which include over-the-counter medications, food and cosmetics, overshadowed a 3.3 percent gain in pharmacy revenue.

Average prescription value fell 4.8 percent due in part to cuts in the prices of generic drugs.

Total same-store sales, an important measure for retailers, rose 2.5 percent. It increased 3.3 percent at front stores and 1.6 percent at pharmacies.

Shoppers Drug Mart, which also operates the Murale luxury beauty destinations, opened seven stores and acquired four stores in the quarter, taking total number of stores to 1,368.

Shares of the company rose 2 percent in early trading to a two-year high of C$45.44. They gave up some of their gains to trade flat at mid-day on the Toronto Stock Exchange.