Jean Coutu Group sees only opportunity in Eckerd integration

Drug Store News,  Sept 13, 2004  by Antoinette Alexander

• E-mail
• Print
• Link

LONGUEUIL, Quebec -- Late last month, the Jean Coutu Group, which operates Brooks Pharmacy in the United States, announced an increase in 2004 fiscal year sales and profits. But what analysts really wanted to talk about was what the chain has planned for its new 1,549 Eckerd locations.

With the acquisition of Eckerd from J.C. Penney now more than 30 days old, the Jean Coutu Group stated thaw its integration of Eckerd is ahead of schedule, and customers will begin to see some changes as early as this month.

"In the last two weeks, I have already been in six or seven markets, and I have seen over 90 or 100 [Eckerd] stores, and Bill Welsh [chief operating officer] has already seen close to the same amount of stores. The only thing we are seeing right now is opportunity," Michel Coutu, president and chief executive officer of Jean Coutu Group USA, told analysts during the Aug. 20 conference call.

Jean Coutu already has started its advertising program at Eckerd and will unveil in the Sept. 26 circulars an ad that will feature fewer coupons and less of an emphasis on food, Coutu said. The company will not, however, cut back the food assortment within Eckerd--which is consistent with other drug chains, Coutu noted--but will de-emphasize food in its flyers to give the ads more of a drug store look and feel.

Eckerd shoppers also soon will see some changes in the beauty care aisle as Jean Coutu works to inject some of its beauty innovations into the Eckerd stores.

"I have already had multiple conversations with major beauty and health manufacturers, and we are starting to make a closer promotion in that area. We were already able to work with one of our major partners to get a better throughput of our supply in the stores. So there will be, in a very short time, some improvement on the in-stock level of health and beauty aids in these stores," Coutu said.

Brooks Pharmacy, because of the Jean Coutu Group's influence, has made its mark in the industry as an innovator in beauty. The company has been adding higher-end products to its beauty departments and continues to cater to department store clientele through its Derma Skincare Centers, which are in-store boutiques that sell French skin care brands and have trained skin care consultants and computerized equipment to analyze skin.

"Very soon, we will be starting some new departments in some Eckerd stores that will show an indication of what will be in Eckerd a couple of years from now," Coutu added.

The company plans to open 100 new Eckerd stores in the current fiscal year, while renovating about 60 existing locations.

In addition to fielding questions about its plans for Eckerd, executives also were faced with inquiries about Eckerd's financial health, specifically J.C. Penney's second quarter loss from discontinued operations of S71 million, which comprised Eckerd's operating loss, as well as adjustments to reflect the final terms of the sale. "I don't think that we can conclude anything on that disclosure on the state of out assets," Coutu stated, looking to allay analysts' concerns.

He added: "What we are seeing is a company that required a pharmaceutical direction. People were just waiting for this to happen, and we feel extremely good. The more stores we see, the better the chain looks."

For the fiscal year ended May 31, the company's American operations generated revenues at U.S.$1.8 billion, up 2.6 percent compared with the year-ago period. Same-store sales rose 4.3 percent.

Jean Coutu's earnings totaled C$176.9 million (U.S.$134.8 million), or 78 Canadian cents per share, compared with last year's C$160.1 million (U.S.$122 million), or 71 Canadian cents per share.

The latest quarter did not include any contribution from the $2.4 billion acquisition of Eckerd.

"Since Sept. 11, there has been some challenges in terms of growth in the United States and especially with the war in Iraq. It has put some pressure on the industry but we reel extremely strong with what is coming up," Coutu stated. "The company is in great shape."

COPYRIGHT 2004 Reproduced with permission of the copyright holder. Further reproduction or distribution is prohibited without permission.
COPYRIGHT 2008 Gale, Cengage Learning