Jean Coutu Exceeds First Quarter Expectations

 The Financial Post reported that the Jean Coutu Group Inc. reported better-than-expected earnings  for its first quarter. The company said profit for its first fiscal quarter (which ended May 28) were $49.9 million, or 22¢ a share. That was up from $43.9million (19¢) a year earlier.

Jean Coutu annouced that it overcame regulatory requirements imposed by the Quebec government, to reduce generic drug prices, which accounted for a larger and growing protion of its prescription business.

Jean Coutu corporate store revenue was up 2.2% to $660.6 million, while  franchise owners revenue gained 2.9% to $957.2 million. The gains were attributed to "overall market growth" and expansion of the chain.

"We are very satisfied with the results of the first quarter of fiscal 2012", CEO François Coutu said in a statement. "Despite the price reductions of generic drugs decreed by the provincial government, we have posted a significant growth of our operational results, which demonstrates the relevance of our strategies and the strength of our organization."

With the introduction by the Federal government of new Consumer Protection legislation last year, suppliers to drug and other health oriented retail chains should be concerned about the regulatory reach of the provincial health ministries and Health Canada and its ability to force changes in product pricing using the same regulatory process it employed for reducing generic drug prices. Ontario underwent similar changes in 2010.

In addtion, the legislation allows for inspectors to seize and prevent the sale of any product deemed by the inpsector to be harmful to the health and safety of the public...all this without a warrant or due process. For those firms importing from Southeast Asia, partiularly China and India, this should be of grave concern as these regulations allow for the imposition of non-tariff trade barriers that could further stifle consumer demand. 

Final Receipt: Consumer Confidence Slips

In Canada, consumer confidence fell to 83.1 in June of 2011 from 85.3 in May of 2011. The Index of Consumer Confidence, the Conference Board's survey of Canadian households measures consumers' levels of optimism regarding current economic conditions. This is a crucial indicator of near-term sales for companies in the consumer products sector.

In the U.S., consumer confidence slipped from 61.7 in May to to 58.5 in June. Over 70% of the economy is dependent on the U.S. consumer, and over 20% of the world relies upon that same consumer for its continued well being.

One of the bell-weather signs will be the Canadian jobs data that comes out this Friday. If it moves toward the downside, the slide in consumer confidence will accelerate.

With the predictions that the economy in both Canada and the U.S. might be slipping back into recession in the fall, companies should be developing and implementing marketing and promotional strategies to account for this possibility. If consumer confidence continues to decline in July and August, the Christmas season which starts to gear up in September could be bleak this year.

Bryan Moir