Shoppers Drug Mart targeting shoppers with individualized offers, CEO says

Shoppers Drug Mart Corp. (TSX:SC) is working to make its marketing more personalized and targeted at both individuals and specific groups of shoppers.

President and chief executive Domenic Pilla said the retailer is in the “very early stages” of using targeted advertising and offers, but they have already helped Shoppers maintain its hold on customers and gain new ones.

“We continue to grow that part of our business and those offers,” he told a conference call with analysts to discuss the company’s latest financial results.

“We also continue to become smarter about our implementation and more targeted and more relevant so the offers resonate more.”

Shoppers’ Optimum program, which rewards shoppers with points based on how much they spend, helps give the company significant insight into its customers and allows it to tailor marketing.

The program has 10 million people registered to collect rewards.

Shoppers, which is in the midst of being taken over by Loblaw Companies. Ltd., said Tuesday it earned $165.8 million or 83 cents per share for the quarter ended Oct. 5. That compared with a profit of $167.7 million or 81 cents per share a year ago when it had more shares outstanding.

Excluding unusual items in both years, Shoppers would have earned 88 cents per share in the third quarter of 2013, up from 85 cents per share a year ago.

The average analyst estimate had been for a profit of 81 cents per share, based on those compiled by Thomson Reuters.

Sales totalled $3.29 billion, up from $3.21 million in the third quarter last year, while same-store sales were up 2.2 per cent.

Pharmacy sales were up 2.7 per cent from a year earlier to $1.582 billion while front-of-store sales were up 2.2 per cent to $1.705 billion.

Shoppers has been renovating their stores to highlight the lucrative cosmetics sections.

During the quarter, the retailer opened six new drug stores, one of which was a relocation, and completed five major store expansions. The company also closed three outpatient hospital pharmacies.

Pilla said he sees opportunities to revamp and expand older locations as well as open new stores as it looks for growth, but is remaining patient when it comes to acquisitions.

“We continue to see markets that are underrepresented and we also continue to see great opportunity for relocations and expansions as well as adding more beauty boutiques in existing stores,” Pilla told analysts.

RBC Capital Markets analyst Irene Nattel said that despite changes by provincial governments to cut prescription drug costs, Shoppers has managed flat to marginally higher earnings following the reforms.

“Shoppers is doing an excellent job navigating through the white water of ongoing reductions to generic pricing, in our view,” Nattel wrote in a note to clients.

“Although regulatory headwinds continue to moderate earnings growth in 2013, Shoppers remains focused on driving profitable share in key categories, and on returning value to shareholders in the form of rising dividend and until proposed transaction with Loblaw, share buy-back,” Nattel wrote.

Under the Loblaw takeover, Shoppers shareholders have the option of receiving $61.54 cash or, alternatively, 1.2941 Loblaw common shares plus one cent cash, subject to caps on the total number of shares and total amount of cash.

The amount of cash is capped at $6.7 billion and the number of shares is capped at 119.9 million.