Jean Coutu Group Inc. (TSX:PJC.A) is Quebec’s largest pharmacy chain, as well as having operations in Ontario and Atlantic Canada. In total, it has 418 franchised stores, as well as owning a manufacturer of generic drugs.
The company recently reported sales that were up 2.4% versus the year before. Strength came from front-end sales, which were up 5.2%. Pharmacy sales lagged a bit, increasing only 1.2%.
Operating income fell slightly as costs crept up, coming in at $78.5 million in the most recent quarter versus $81.7 million last year. That translated into slightly weaker earnings per share of $0.28 versus $0.29 last year.
Jean Coutu currently trades hands at 18.3 times trailing earnings, which is in line with many of its Canadian retail peers. It pays a dividend of 2.3%, and has raised its payout each year since 2007. Its latest dividend increase was from $0.11 to $0.12 per share each quarter. The company has a payout ratio of under 45%.
Jean Coutu has long been rumoured as an acquisition target, with Metro Inc. (TSX:MRU) being the most likely suitor. The two companies compete in a similar geographic area. Metro has been left behind after its two main rivals made big acquisitions over the last few years. And Jean Coutu, the man behind his namesake chain, is 89 years old.
If Metro does decide to take a run at Jean Coutu, it would likely come at a pretty substantial premium. If not, investors are still getting paid a decent yield to own one of Canada’s largest pharmacies.
