Drugstore chain retailer,
Rite Aid Corporation
) comparable-store sales (comps) for the month of September (4
weeks ended Sep 28, 2013) escalated 1.9% from the prior-year
period, primarily driven by better comps results at its pharmacy
stores. This was however, partially offset by weak front-end
Pharmacy comps for September were up 3.1%, which included a
negative impact of nearly 100 basis points from generic drug
introduction. Further, the company witnessed a 0.9% rise in
prescription count at comparable stores. However, the company's
front-end comps reflected a marginal decline of 0.5%.
Rite Aid reported total drugstore sales of $1.935 billion for the
month, up 1.9% from the year-ago figure of $1.899 billion.
Prescription sales constituted 68.7% of total drugstore sales.
Third-party prescription sales accounted for 97.1% of pharmacy
For the 30-week period ended Sep 28, Rite Aid's comps dipped 0.4%
from the prior-year period. The fall was primarily due to a 0.6%
drop in pharmacy comps, while front-end comps remained flat year
over year. Prescription count at comparable stores rose 0.1%.
In the period, total drugstore sales slipped 0.7% to $14.449
billion from $14.545 billion in the comparable period of fiscal
2013. Prescription sales comprised 67.8% 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 the first two
quarters of fiscal 2014, when generic medication primarily drove
its margin expansion. Going forward, this Zacks Rank #1 (Strong
Buy) stock is likely to focus on expanding its portfolio of
generic medication, given the rising 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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