With SDM in top form, Schreiber succeeds Murphy

Chain Drug Review, April 23, 2007

TORONTO -- "A strong finish to another good year." That was how retiring Shoppers Drug Mart (SDM) chairman and chief executive officer Glenn Murphy summed up the results of the last quarter of fiscal 2006.

The performance was a fitting swan song to Murphy's period of office, which began in 2001. Quarter by quarter during his tenure Murphy had the pleasure of being able to report consistent improvement in almost every one of the factors that influence investors in judging a company and its prospects.

With Jurgen Schreiber's assumption of the CEO post last month a new era began. Schreiber acknowledges that he has big shoes to fill, but in his public appearances prior to succeeding Murphy he appeared full of confidence that the company can maintain its momentum under his leadership. A positive indicator that he may well accomplish this is the fact that none of the executive team that Murphy put together and performed so convincingly on his watch shows any signs of moving on.

Schreiber comes to his new responsibilities after just eight months with SDM: He was recruited to fill the position of president and chief operating officer in mid-2006. He brought with him a wealth of international business experience, much of it in retailing.

A native of Germany, Schreiber has exercised management responsibilities for operations in some 30 countries all over Europe and in Southeast Asia. He had a 14-year tenure at Reckitt Benckiser, during which he held the position of senior vice president for East Asia. Schreiber's most recent position before joining SDM was CEO for health and beauty at A.S. Watson, a subsidiary of Hutchison Whampoa Ltd., whose international holdings include the world's largest network of health and beauty aids stores. He was responsible for the operation of more than 4,000 retail outlets in 23 countries in Europe and Russia.

With Murphy's departure SDM elected to separate the functions of chairman and chief executive officer (Murphy had held both positions). The board elected one of its members, David Williams, to be nonexecutive chairman, and he assumed that office at the end of March. Williams, who has served on the board since September 2003, is a seasoned retail executive, having gained most of his experience as a member of Loblaw Cos.' senior management. After retiring from the supermarketer, he served as president and CEO of the Ontario Workplace Safety and Insurance Board.

SDM also added another well-known name to its board roster. Gaeten Lussier brings with him deep knowledge of the workings of the higher levels of government and the food industry. A former deputy minister of the Quebec and then the federal departments of agriculture, and thereafter a CEO of two large food manufacturing companies in succession, Lussier clearly has much useful experience to offer the drug chain.

SDM's sales of $7.79 billion (Canadian) in fiscal 2006 represents an increase of 8.9%. Gains of 9.5% for prescription drugs and 5.3% for the front end represent market share gains in both categories. Management was pleased that the front end's share of total sales again advanced--although marginally--to 46.9% from 46.7% in the preceding year.

Sales per square foot, at $975, were down slightly, a phenomenon attributable, Murphy observed, to both the increased proportion of lower-price generic medications being dispensed and the large amount of selling space coming on stream. New and expanded stores typically take a few years to reach their potential. The company's market share within the chain drug sector increased again last year to 14.5%.

SDM is forecasting a sales increase of 9% to 10% in 2007, with comparable-store sales growth of between 6% and 7% in pharmacy, and 4.5% to 5.5% at the front end. It expects that the gains in prescription volume will be driven by higher script counts, with drug price inflation not being a significant factor.

Earnings improved last year and did so disproportionately to sales, by 15.9%, reaching $422 million. The board celebrated

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