By Scott Anderson
TORONTO (Reuters) - Shoppers Drug Mart
But its shares dropped about 1 percent as investors worried about impending legislative reforms in the province of Ontario covering payments to pharmacies for handling prescriptions and allowances paid to pharmacies by generic drug manufacturers for stocking their drugs.
Ontario, Canada's most populous province, is reviewing the legislation and is expected to enact changes early next year.
Analysts see a hit to earnings per share of between 20 Canadian cents and 35 Canadian cents if the province goes through with the reforms.
"The stock is going to remain range-bound until something comes out from Ontario on what is going to happen with this drug reform," said Brian Yarbrough, an analyst at Edward Jones, in St. Louis, Missouri.
Shoppers shares, which have fallen about 7 percent in the past year, were down 1.1 percent at C$43.99 on the Toronto Stock Exchange at midday on Wednesday.
Shoppers said it earned C$170.9 million ($163.5 million), or 79 Canadian cents a share, for the third quarter ended Oct 10, up from C$160.3 million, or 74 Canadian cents a share, in the year-before quarter.
Revenue climbed 7.9 percent to C$3.01 billion, with same-store sales rising 4.8 percent.
Analysts had expected, on average, earnings per share of 80 Canadian cents before items and revenue of C$3.00 billion, according to Thomson Reuters I/B/E/S.
Prescription drug sales on a same-store basis gained 5.8 percent. Total prescription sales climbed 9.7 percent to C$1.48 billion, accounting for 49.1 percent of the company's sales mix, up from 48.3 percent for the same period last year.
Front-of-store sales, which include products such as cosmetics, candy and over-the-counter medications, jumped 6.2 percent to C$1.53 billion, excluding tobacco, on a same-store basis.
"They continue to do a great job driving pharmacy sales and front-end sales continue to be strong," Yarbrough said. "When you look at the kind of sales that they are putting up on the front end, considering the tough economic environment, it's pretty impressive, compared with what else is going on out there in retail."
Shoppers opened or bought 37 drug stores in the quarter, including 15 relocations. At the end of the quarter, the company had 1,282 stores, including 1,212 drug stores and 66 Shoppers Home Health Care stores, which supply medical equipment and devices, and four Murale stores, a stand-alone luxury beauty brand the company launched last year.
($1=$1.05 Canadian)
(Reporting by Scott Anderson; editing by Peter Galloway)
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