Rite Aid Corp.
) achieved a new 52-week high of $5.35 on Oct 17, 2013, beating
its previous high of $5.33 on Oct 7. Moreover, the drugstore
chain retailer eventually closed trade at its new 52-week peak,
reflecting a solid year-to-date return of approximately
threefold. The average volume of shares traded over the last 3
months was approximately 26,872K.
Moreover, the company currently trades at a forward P/E of
24.8x, a 53% premium to the peer group average of 16.21x. The
company's premium valuation is justified, given its long-term
earnings per share (EPS) growth rate of 17.5% versus the peer
group's growth rate of 13.7%.
We believe that the strong price appreciation is primarily
attributable to the company's comparable-store sales (comps)
growth for September. This was the fourth consecutive month when
Rite Aid posted positive comps results.
Apart from this, consistent positive earnings in the past four
quarters were a tailwind. Rite Aid, which witnessed declining
sales and weak bottom-line results in the recent past, is now
showing signs of improvement, thanks to the company's cost
reduction initiatives and improvement in store-level
This Zacks Rank #1 (Strong Buy) stock has outperformed the
Zacks Consensus Estimate five times in the trailing six quarters.
In the recently concluded quarter, Rite Aid posted adjusted
earnings of 8 cents per share, which fared better than the Zacks
Consensus Estimate of a loss of 4 cents and the year-ago
comparable quarter's loss of 5 cents.
Furthermore, on the back of better-than-expected first-half
financial results and a stronger second-half performance than
what was projected earlier, management raised its fiscal 2014
guidance. Rite Aid now expects earnings in the range of 18-27
cents per share for the fiscal, up from the previous range of
1-16 cents. Currently, the Zacks Consensus Estimate stands at 22
cents per share.
Rite Aid utilized additional resources such as the Wellness+
customer loyalty program and the Flu Immunization program to
boost customers' demand amid the challenging macroeconomic
environment. The company's customer loyalty program has been
successful in attracting customers. This is evident from the fact
that Wellness+ members in fiscal 2013 contributed 79% of
front-end sales, compared with 68% in fiscal 2012.
On the cost front, the company is focusing on generating cost
savings through centralized indirect procurement of drugs and
reduction in supply chain costs. We believe that these programs
and initiatives will facilitate the company to increase its
customer base and generate long-term profitability.
Apart from Rite Aid, other retail stocks such as
Best Buy Co., Inc.
Newell Rubbermaid Inc.
) touched new 52-week highs of $63.63, $42.96 and $28.85,
respectively, on Oct 17.
BEST BUY (BBY): Free Stock Analysis Report
COLGATE PALMOLI (CL): Free Stock Analysis
NEWELL RUBBERMD (NWL): Free Stock Analysis
RITE AID CORP (RAD): Free Stock Analysis
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