Shoppers Drug Looks Strong; Rated a Buy

Shoppers Drug Mart Corp. (SHDMF.PK) continues to cruise along as other retailers struggle, analysts say.

In a note to clients, Desjardins Securities analyst, Keith Howlett wrote:

The company’s results showed no negative impact of having 50% of its stores in the weakening Ontario market, which also has intense food and mass competition.

In the same market competitors have been “struggling to post comparable store sales increases,” he noted.

The Ontario market is a particular challenge because of a slowdown in the manufacturing economy, he added. The analyst maintained his "buy" rating on the shares and a price target of C$60.

UBS Investment Research analyst Vishal Shreedhar reiterated his "buy" rating and shaved his price target slightly to C$63 from C$64.

In a note to clients, he wrote:

We view Shoppers as a high quality company with a defensive earnings stream

Margins continue to benefit from improved mix, increased private label, purchasing power and maturing real estate. ... [Prescriptions and over the counter drugs] remain well-insulated, prestige cosmetics continue to gain share, and new categories such as food are adding to profitability.

Shoppers noted increased sales in all regions and in all product categories except tobacco, he added.