Shoppers: Smaller, High-End Stores Should Increase Profits

Shoppers Drug Mart’s (SHDMF.PK) move into smaller stores that will sell high-end cosmetics and drugs could mean big money for the retailer.

In a note, analyst Keith Howlett of Desjardins Securities wrote:

A senior beauty executive has been recruited to head up the effort. We believe this signals that management expects consumers will embrace the concept.

The analyst predicts a decision on whether to roll out the stores after an initial test pilot that would not happen until after the 2008 holiday sales period. He maintained his buy rating and C$60 target price on Shoppers shares.

“We are positive on measured incremental initiatives to extend the company’s franchise,” Mr. Howlett said, such as branching into pharmacy work at long-term care centres, expanding home health care offerings and testing new store concepts.