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Rite Aid Corporation Message Board

  • ace_trackers ace_trackers May 6, 2013 12:45 PM Flag


    Recent sales data appear to confirm a slowdown in sales at Rite Aid, which will ultimately pressure the bottom line. Accordingly, I believe that Rite Aid shares have become overvalued during their recent run.

    Sales data continues to disappoint
    Last week, Rite Aid reported disappointing sales data for April. This bolsters the case that the company's surprise profit in fiscal year 2013 did not reflect a sustained improvement in the business. Same-store sales decreased 4% last month, with front-end sales down 3.5% -- partially due to the shift of Easter to March this year -- and pharmacy same-store sales down 4.2%. Prescription count was down 0.2% year over year, confirming that some customers are taking their business back to Walgreen. In fact, Walgreen experienced a 9.7% increase in prescription count last month, or 6.3% accounting for a calendar-day shift compared to 2012. The divergence in pharmacy results between Rite Aid and Walgreen is very significant.

    For the combined March-April period, Rite Aid's same-store sales were down 3% due to the introduction of new generic drugs. Front-end same-store sales increased 0.1%, and prescription count also increased 0.1%. In other words, if we adjust for the timing of Easter and the effect of generic introductions, Rite Aid's comparable-store sales have not turned negative yet. That said, sales gains have slowed to a crawl, and may not be sufficient to cover normal inflation in operating expenses.

    A look at Rite Aid's monthly sales data for 2012 and 2013 (year to date) shows a clear downward trend. To be fair, some of the deceleration in late 2012 was caused by a higher rate of new generic introductions. However, this effect has tapered off in the past several months, while the downtrend continues:

    Know what you are dealing with and take heed to the old timers on this thread........................ace

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