Australian Pharmaceutical Industries warns of store closures

The listed Australian Pharmaceutical Industries has warned it will take a hit from the impact of COVID-19 on its retail business operations.

API confirmed it had decided to rationalise its Priceline company store network of non-pharmacy stores.

The listed Australian Pharmaceutical Industries has warned it will take a hit from the impact of COVID-19 on its retail business operations and will close some shops that do not have instore pharmacies.

The company said it had experienced a strong bounce back in its skincare clinics in the wake of shut downs but confirmed it had decided to rationalise its Priceline company store network of non-pharmacy stores.

In a pointer for tough times for retail property landlords that are struggling to draw customers back to larger malls, API said it made the move after carefully considering the long-term impacts of COVID-19 on foot traffic in CBDs and shopping centres relative to ongoing rents.

The company will shut stores that it says do not benefit from the additional foot traffic that dispensaries provide to Priceline Pharmacies and will lead it to cut the network by 14 stores.

The move, along with other costs associated with COVID-19, will produce a $9.4m hit to half-year profit.

Overall, the company says its outlets mainly are running as forecast, with underlying net profit after tax for the financial year ended August to be broadly in line with market expectations at $30m-$31m and it has cut debt.

 

API said the pipeline for new Priceline pharmacies remained strong and relatively unaffected by the pandemic.

However, in readying for the “post-pandemic world” it has written down the $37.5m carrying value of the Soul Pattinson Chemist brand. Closing the 14 stores will lead to a $5.5m profit hit relating to inventory costs.

API managing director Richard Vincent said the underlying profit and strong balance sheet showed the company was “successfully executing” its strategic priorities to deliver sustained shareholder value.

“We have 14 Clear Skincare clinics and 22 Priceline company-owned stores temporarily closed in Victoria,” he said. “These will re-open when COVID-19 lockdown rules allow. Where we have reopened Clear Skincare clinics after mandated shutdowns, pent-up demand has been significant, with comparative sales up 25 per cent on pre-COVID-19 levels, followed by a sustained uplift.”

Since the half year, a further eight clinics have been opened, with the pipeline for further openings remaining strong, and the company is doing well online.

“Priceline company stores and Priceline Pharmacies are also trading strongly compared to the same period last year in those states where COVID-19 restrictions have been lifted,” Mr Vincent said. “Priceline’s online sales reflect growth of more than 100 per cent, albeit from a low but growing base.”