Fontana profits slide due to store opening
Pharmacy chain Fontana Limited reported a rare first-quarter dip in profit, due to increased staff and other costs related to the opening of its newest store in Portmore, St Catherine. A similar dip happened when the company opened its sixth store...
Pharmacy chain Fontana Limited reported a rare first-quarter dip in profit, due to increased staff and other costs related to the opening of its newest store in Portmore, St Catherine.
A similar dip happened when the company opened its sixth store on the corner of Waterloo Road in Kingston in 2019.
The company expects the ensuing quarter ending December to result in increased sales with the commissioning of the new store that’s set to happen officially on Saturday.
“We are confident that we will benefit from an increased customer base and economies of scale, as we continue to grow our brand and footprint across Jamaica,” said Fontana CEO Anne Chang.
The company now operates seven stores, with two in the capital city of Kingston.
Total revenue in the September quarter grew 8.3 per cent year-on-year to $1.78 billion, driven by improved metrics across all locations, including transaction counts, average spend per customer, and prescription counts, Fontana’s management indicated.
Despite the positive revenue trend, net profit fell 30 per cent to $61.4 million from $87.6 million, marking the first decline in several years. This translated to earnings per share of $0.05, a decrease from $0.07 for the corresponding quarter. Operating expenses played a role in the profit decline, rising by 12.5 per cent to $522.3 million, mainly related to higher staffing. Back in 2019 when the company opened its Waterloo location, first-quarter expenses increased 20.9 per cent, reflecting increased staffing. At the time, total operating expenses was $296 million for the September quarter, and net profit plummeted by 56 per cent, from $42 million to $18 million.
“This is largely attributable to increased staffing to strengthen the organisational structure and ongoing staff retention efforts, including the introduction of a breakfast programme and departmental incentives for attaining key performance indicators–KPIs,” said Chang, regarding the current period.
Fontana faced increased security and insurance rates, as well as set-up costs for the new store. Operating profit for the quarter was $80.8 million, down from $124.5 million the previous year.
The pharmacy chain’s gross profit margin declined slightly due to the traditional back-to-school sale promotion, resulting in an overall margin reduction. However, gross profit increased by 2.4 per cent to $603.2 million, compared to the same quarter in the previous year.
Fontana’s other income experienced a noteworthy 92 per cent increase, reaching $33.1 million, compared to $17.3 million in the same quarter last year. The company credited the increase to favourable returns from short-term investments.
The company’s balance sheet reflected growth in the quarter, with total assets expanding by 11 per cent to $5.2 billion, inclusive of cash holdings of $1.2 billion.