Rite Aid Posts Strong April Comps


Drugstore chain Rite Aid Corporation’s (RAD) same-store sales (comps) for the one month ended April 28, 2012, rose 2.9%, based on strong front-end, pharmacy and prescription count comps for the month. Front-end same-store sales for April 2012 increased 2.7%, while pharmacy and prescription count comps were up 3.0% and 3.8%, respectively.

Pharmacy comps for April included a negative impact of around 311 basis points from new generic introductions.

Rite Aid reported total drugstore sales of $1.993 billion in April, with prescription sales accounting for 67.9% of drugstore sales and third party prescription sales making up for 96.6% of pharmacy sales. The company’s April sales represented a 2.5% rise from the year-ago level of $1.945 billion.

Comps so far in fiscal 2012

Year-to-date, Rite Aid has registered a comps increase of 3.3% for the eight weeks ended April 28, 2012. Comps for the period comprised 3.6% front-end comps, 3.1% pharmacy comps and 3.2% prescription comps.

Net sales of $3.982 billion, thus far, in fiscal 2012 represent a 2.8% increase from $3.875 billion reported in the year-ago period. Sales for the eight-week period included 68.5% contribution from prescription sales and 96.7% from pharmacy sales.

Our Take

In an effort to expand its pharmacy and clinical services, Rite Aid has applied additional resources, such as Wellness+ program for diabetes and Flu Immunization program. We believe these programs will enable the company to increase its customer base as well as long-term profitability.

Moreover, the company is in the process of various cost cutting initiatives including centralized indirect procurement of drugs, administrative headcounts requirement, reducing supply chain costs, reducing debt, etc. which will certainly benefit the company to improve its bottom line.

Headquartered in Camp Hill, Pennsylvania, Rite Aid is the third largest retail drugstore in the U.S. based on revenues and number of stores. The company operates in 31 states across the country and in the District of Columbia. As of April 28, 2012, the company operated 4,658 stores versus 4,705 stores in the same period last year.

Rite Aid, which competes with CVS Caremark Corporation (CVS) and Walgreen Co. (WAG), currently, holds a Zacks #2 Rank, implying a short-term ‘Buy’ rating on the stock. The company retains a long-term ‘Neutral’ recommendation on the stock.

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