We’ll shut Priceline pharmacies if rent too high, API boss warns
The CEO of Australian Pharmaceutical Industries says he will close Priceline Pharmacies if deals on rent relief can’t be reached.
Richard Vincent, chief executive of Australian Pharmaceutical Industries, says he is not afraid to close its Priceline Pharmacies if deals on rent relief can’t be reached with landlords.
Commercial landlords have been seeking detailed information on revenue and foot traffic from API as the company seeks to keep its network of 500 Priceline Pharmacies open during the coronavirus pandemic.
It comes as the company skips paying a dividend and delivering guidance as coronavirus clouds its outlook.
Mr Vincent said its CBD stores had experienced the greatest falls in foot traffic and landlords wanted to know how much the COVID-19 had hurt the company before they granted any relief.
“Generally those conversations have been balanced but we are not finished. They want to gather data, understand what has happened with turnover and traffic before they make a decision,” Mr Vincent said.
“Once they start asking about those sorts of things, it tells you that they are looking at it in a balanced way. But if we get to a point where we can’t find a balanced commercial outcome, I’m not afraid to close stores. The size of our network is large enough.
“We don’t want stores trading on rents to sales that don’t work for us.”
COVID-19 has pitted many struggling retailers and landlords against each other, with some property managers even encouraging tenants to dip into superannuation to pay their rent, triggering a rebuke from the corporate regulator, who warned that such advice could lead to five years’ jail.
Meanwhile, Solomon Lew says his Just Group, which has closed stores during the pandemic, will not pay rent during the shutdown, upping the ante in his ongoing stoush with commercial landlords.
Mr Vincent said while suburban Priceline stores were trading well as people rushed to fill their repeat prescriptions last month, its stores in bigger cities were struggling.
“We have some stores in the CBD areas and buried deep inside shopping centres that don’t have traffic and have seen a drop in volume.
“For those stores we have been approaching the landlords one by one, whether they are big corporates or individual landlords, and just saying we want to sit down and have a conversation.
“If we had to close Priceline stores or permanently close Clear Skincare Clinics, we are prepared to. Fortunately, we haven’t had to go down that path yet.”
API’s rental negotiations follow the company posting a 1.9 per cent decline in net profit to $26.3m in the six months ending February 29. Revenue firmed 2.8 per cent lift to $2bn. The result was in line with guidance the company gave at its AGM in January. API’s shares slumped 9.8 per cent to $1.02 on Thursday.
Mr Vincent said API had strengthened its financial position through the sale last December of its 11 per cent stake in rival Sigma, which it had attempted to take over. It sold out at an average price of 60c a share. This compares with the 62.5c a share average it spent on acquiring its stake in 2018.
He said the company was also able to “rapidly deploy” Click & Collect across its Priceline network to partially offset foot traffic losses.
“We launched Click & Collect during the half and subsequently were able to deploy during the COVID-19 pandemic, leveraging our store network to efficiently distribute to our customers.”
In its wholesale business, Pharmacy distribution revenue grew 7.1 per cent to $1.43bn, while gross profit firmed $3m to $112m.
Mr Vincent said as part of the company’s efforts to lower its cost base it closed its Newcastle and Canberra distribution centres, consolidating operations at its warehouse in Camella.
“It remains a highly competitive marketplace, so I am pleased to say that we grew revenue and gross profit and we increased the overall number of stores in our banner groups. We now have over 1500 members in our retail pharmacy programs compared to over 1400 in the prior period.”
Mr Vincent said the group would proceed with investing $50m in a “new, highly automated” distribution centre in Sydney.
“We anticipate the majority of the spend would be in FY22,” he said.
Why more investors put their money before the environment
Sustainable investing has been a growth area in recent years but a new study suggests some people are putting it on the backburner.
Copilot a time saver but workers at odds over who benefits
Microsoft’s AI assistant saves workers an average of about 20 hours a month allowing them to concentrate on important work. But a debate has emerged about how to share those time savings.