Rite Aid's August Comps Improve - Analyst Blog

By
A A A

Drugstore chain retailer, Rite Aid Corporation ( RAD ) 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 declined 1.7%.

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 sales.

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 0.1%.

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 Walgreen Co. ( WAG ) and CVS Caremark Corp. ( CVS ) 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. 's ( WMT ) 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 Report

RITE AID CORP (RAD): Free Stock Analysis Report

WALGREEN CO (WAG): Free Stock Analysis Report

WAL-MART STORES (WMT): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: CVS , RAD , WAG , WMT

Zacks.com

Zacks.com

More from Zacks.com:

Related Videos

Russell’s One Good Reason
Russell’s One Good Reason           
Tammy’s One Good Reason
Tammy’s One Good Reason             
Lisa’s One Good Reason
Lisa’s One Good Reason              

Stocks

Referenced

Most Active by Volume

87,324,760
  • $7.31 ▲ 22.04%
79,329,227
  • $17.16 ▲ 0.76%
74,153,988
  • $8.87 ▼ 5.84%
49,177,672
  • $34.01 ▲ 4.39%
44,197,901
  • $101.40 ▲ 1.38%
43,197,735
  • $11.70 ▲ 3.36%
42,712,021
  • $74.99 ▲ 1.19%
42,423,171
  • $108 ▲ 0.95%
As of 10/31/2014, 04:15 PM

Find a Credit Card

Select a credit card product by:
Select an offer:
Search
Data Provided by BankRate.com