Drugstore chain retailer,
Rite Aid Corporation
) reported marginal growth in comparable-store sales for Jul
2013. The company's comps for the 4-week period ended Jul 27,
2013 inched up 1.3% over the prior-year period, primarily driven
by improved comps results at its pharmacy and front-end stores.
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Pharmacy comps for July were up 1.6%, which included a negative
impact of nearly 307 basis points from generic drug
introductions. The results were also aided by a 0.4% rise in
prescription counts. Additionally, the company's front-end comps
Rite Aid reported total drugstore sales of $1.898 billion for the
month, up 0.9% from the year-ago figure of $1.881 billion.
Prescription sales constituted 67.7% of total drugstore sales.
Third-party prescription sales accounted for 97.0% of pharmacy
For the 21-week period ended Jul 27, Rite Aid's comps decreased
1.2% from the prior-year period. The fall was primarily due to a
1.9% drop in pharmacy comps, partially offset by 0.4% rise in
front-end comps. Prescription count at comparable stores remained
flat year over year
In the period, total drugstore sales fell 1.5% to $10.089 billion
from $10.247 billion in the comparable period of 2012.
Prescription sales comprised 67.5% of total drugstore sales.
Additionally, third-party prescription sales constituted 97.0% of
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 the average $10.00 generic drug