Drugstore chain retailer,
Rite Aid Corporation
) recently announced that it has acquired Town Hill Pharmacy.
However, financial terms of the deal were not disclosed.
The move came as a part of the company's strategy to boost its
market share in the pharmacy business. Rite Aid has been taking
several initiatives to expand its pharmacy and clinical services,
which includes the Wellness+ program for diabetes as well as Flu
Immunization program. We believe these programs will enable the
company to solidify its customer base as well as its long-term
However, liquidity remains a concern, as Rite Aid is a highly
leveraged company (with approximately 176% debt-to-capitalization
ratio at the end of first-quarter 2013), which limits its cash flow
availability and its ability to obtain additional financing.
Moreover, the debt burden from the 2007 Brooks Eckerd
acquisition has increased interest expense, which has been weighing
upon its bottom line. This has placed the company at a competitive
disadvantage relative to its peers who are less burdened with
Earlier this month, the company announced its preliminary sales
results for the second quarter of fiscal 2013. Rite Aid's
comparable store sales remained flat compared to last year, with
front-end comps increasing 1.4%, offset by a 0.7% decline in
pharmacy comps. Prescription count at comparable stores grew 4.0%
in the quarter.
Total drugstore sales for the quarter came in at $6.208 billion,
sliding down 0.7% from $6.251 billion in the prior-year quarter.
Quarterly sales included a 67.5% contribution from prescription
sales, while third-party prescription sales accounted for 96.5% of
Rite Aid is scheduled to report its second-quarter financial
results on Thursday, September 20, 2012. The current Zacks
Consensus Estimate for the quarter stands at a loss of 8 cents per
share, indicating an improvement from a loss of 12 cents in the
Rite Aid, which competes with
CVS Caremark Corporation
), currently, has a Zacks #2 Rank, implying a short-term 'Buy'
rating. However, we are maintaining a long-term 'Neutral'
recommendation on the stock.
CVS CAREMARK CP (CVS): Free Stock Analysis
RITE AID CORP (RAD): Free Stock Analysis Report
WALGREEN CO (WAG): Free Stock Analysis Report
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