Drugstore chain retailer,
Rite Aid Corporation
) reported marginal growth in comparable-store sales (comps) for
Aug 2013. The company's comps for the 5-week period ended Aug 31,
2013 inched up 1.1% from the prior-year period, primarily driven
by better comps results at its pharmacy stores. This was however,
partially offset by weak front-end comps performance.
Pharmacy comps for August were up 2.5%, which included a
negative impact of nearly 161 basis points from generic drug
introduction. A 0.2% drop in prescription counts also adversely
affected the results. Further, the company's front-end comps
Rite Aid reported total drugstore sales of $2.425 billion for
the month, up 1.1% from the year-ago figure of $2.399 billion.
Prescription sales constituted 68.4% of total drugstore sales.
Third-party prescription sales accounted for 97.1% of pharmacy
Rite Aid's comps for second-quarter fiscal 2014 inched up 1.0%
from the comparable year-ago quarter with pharmacy comps
increasing 1.7% and front-end comps declining 0.3%. Prescription
count at comparable stores remained flat year over year.
Total drugstore sales nudged up 0.7% to $6.250 billion in the
quarter compared with $6.205 billion in the second quarter of
fiscal 2013. Prescription sales accounted for 67.9% of total
drugstore sales. Additionally, third-party prescription sales
constituted 97.0% of pharmacy sales.
For the 26-week period ended Aug 31, Rite Aid's comps dipped
0.8% from the prior-year period. The fall was primarily due to a
1.1% drop in pharmacy comps, while front-end comps remained flat
year over year. Prescription count at comparable stores fell
In the period, total drugstore sales fell 1.0% to $12.514
billion from $12.646 billion in the comparable period of fiscal
2013. Prescription sales comprised 67.7% of total drugstore
sales. Additionally, third-party prescription sales constituted
97.0% of pharmacy sales.
Rite Aid, which trails
CVS Caremark Corp.
) in terms of store count, has persistently witnessed a downward
sales trend over several quarters due to the introduction of
lower cost generic (non-brand) drugs. Such non-branded drugs are
less expensive in the market but generate higher gross margins
for the company.
This is evident from Rite Aid's performance in first-quarter
fiscal 2014, when generic medication primarily drove its margin
expansion. Going forward, this Zacks Rank #3 (Hold) stock is
likely to focus on expanding its portfolio of generic medication,
given the growing demand for such drugs.
However, Rite Aid's generic drug sales could be dented by
Wal-Mart Stores Inc.
) entry into the retail generic drug market. Due to Wal-Mart's
wide array of manufacturers in India, Israel and the U.S., the
mass merchant can offer the particular drugs at a more discounted
price when compared to other drugstore chain retailers.
CVS CAREMARK CP (CVS): Free Stock Analysis
RITE AID CORP (RAD): Free Stock Analysis
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