Retail Gives Pharmacy a Cold While Drugs Maintain Health
Pitcher Partners Pharmacy averages for the four month’s ended October 2018 provide interesting insight into what has been happening financially within community Pharmacies in recent times.
Anecdotally, owners will confirm the difficulties encountered – largely consistent with that experienced by all retailers - and none more so than shopping centre operators who continue to face high rents increasing at rates greater than CPI while foot traffic and sales decline.
For YTD October 2018 (table below) our client’s results highlight a total sales decline of 6.4% due to a reduction in dispensing of high cost drugs (eg Hep C) and ongoing government driven medicine price reductions accompanied by a retail decline of 6.5%. The negative retail growth was driven by both a 4% reduction in total items sold and a fall in average retail sale from $14.14 to $13.59
Fortunately the loss of highly visible sales dollars (average prescription value has fallen from $38.48 to $34.27 for the comparable period) has been offset by script growth of 5.2% and the nudging upwards of average GP$ per script nudge from $12.46 to $12.53. As a consequence dispensary GP$ grew by 5.8% and more than offset the retail pain to ensure that total GP$ actually increased by 2.3%. For the time being this GP$ increase for many Pharmacies has been sufficient to cover the inflationary growth from expenses.
With the ongoing shift of retail spend to online and the current economic concerns stifling consumer spending it is unlikely that Christmas will change the outlook mood of many retailers. For Pharmacies, the mainstay of medicines continue to underpin business financial health but the clear message from recent consumer activity is that retail relevancy needs to be built out from the core offering using a secure services bridge or risk seeing retail drift away.