04/25/2013 09:58 EDT | Updated 06/25/2013 05:12 EDT

Shoppers Drug Mart says first-quarter profit inches higher in pre-Target results

TORONTO - Shoppers Drug Mart Corp. (TSX:SC) is keeping a cautious tone as the pharmacy retailer heads into a year where it will look for ways to grow its business amid the uncertainty from U.S. retailer Target.

The company posted relatively flat earnings on Thursday, with profits rising to $119.5 million, or 59 cents per share, from $118.8 million, or 56 cents, a year ago, which met analyst expectations according to a poll from Thomson Reuters.

Sales in the quarter amounted to $2.49 billion, up from $2.39 billion, while same-store sales were up 2.5 per cent in the quarter ended March 23.

The results benefited from lower costs across its operations and better productivity at its stores, however those improvements were offset by higher operating expenses tied to its expansion plans.

Executives at the company outlined a plan that lowered the priority of opening new stores and focused more on buying independent pharmacies.

"We've been very disciplined and looking at where does that make sense to grow the store network," chief financial officer Bradley Lukow told analysts on a conference call.

"So, you'll see more activity and the acquisition space and relocations, going forward."

Shoppers said it opened seven new drug stores, one of which was a relocation, in the first quarter and completed six store expansions. The company also acquired four drug stores and one long-term care pharmacy in the quarter.

"The team is actively engaged through all parts of the country, with a focus on Ontario and Western Canada, with regards to acquisition opportunities," Lukow said.

Shoppers had 1,368 stores at the end of the quarter.

The latest quarter didn't include the potential impact from the presence of Target, which opened its first stores in Ontairo just after the end of the quarter.

"We are obviously watching it carefully and deploying our programs that we designed last year in reaction to new entry," Lukow said.

The company said pharmacy sales at its stores increased 3.3 per cent for the quarter to nearly $1.21 billion, while sales from the rest of the store grew 4.3 per cent to roughly $1.28 billion.

Same-store pharmacy sales were up 1.6 per cent, while they were up 3.3 per cent for the front of the store.

Shares of Shoppers Drug mart rose 15 cents to $44.85 on the Toronto Stock Exchange.