Rite Aid's Comps Fall Again - Analyst Blog

Drugstore chain retailer, Rite Aid Corporation 's ( RAD ) same-store sales (comps) for the four weeks ended December 29, 2012 slipped 2.2%. The fall was an outcome of a decline in pharmacy and front-end comps.

Despite a 4.4% increase in prescription counts, Pharmacy comps for December declined 2.9% primarily due to a negative impact of around 605 basis points from new generic drug introductions. An increase of 1.7% in flu-related prescriptions and flu shots primarily prompted the growth in prescription counts. Further, the shift in holiday calendar resulted in a dip of 1.0% in front-end comps.

Rite Aid reported total drugstore sales of $2.054 billion for the month, with prescription sales accounting for 62.9% of drugstore sales and third-party prescription sales making up for 96.6% of pharmacy sales. The company's December sales declined 2.7% from the year-ago level of $2.112 billion.

Year-to-date, i.e. for the 43-week period ended on December 29, the company's comps were up by a modest 0.1%, while net sales slipped 0.6% year over year to $20.913 billion. The increase in comps mainly came from a 1.4% increase in front-end comps partially offset by a 0.6% decrease in pharmacy comps. Prescription sales comprised 67.4% of total sales. Additionally, third-party prescription sales accounted for 96.6% of pharmacy sales.

Peer Performance

Walgreen Company ( WAG ) also reported a dull month with December 2012 sales declining 4.0% on a year-over-year basis to gross $6.99 billion. The company's overall comps declined 6.1%, primarily due to declines of 8.9% and 2.3% in pharmacy and front-end comps, respectively.

Our Recommendation

Rising estimates over the last 30 days - basically due to the company's solid third-quarter fiscal 2013 results and raised bottom-line outlook - have helped Rite Aid to achieve Zacks #1 Rank, implying a short-term Strong Buy rating.

The company, in December 2012, reported better-than-expected quarterly results for the third quarter of fiscal 2013. Rite Aid's earnings of 7 cents per share fared better than the prior-year quarter's loss of 6 cents as well as the Zacks Consensus Estimate of a loss of 4 cents a share. The company's total revenue of $6.238 billion also swept past the Zacks Consensus Estimate of $6.209 billion.

Bolstered by strong quarterly performance, the company raised its outlook for fiscal 2013, anticipating loss/earnings per share in between a loss per share of 5 cents and earnings per share of 3 cents, up from the previous guidance of loss per share between 9 cents to 23 cents.

Following the company's revised guidance, all of the 5 estimates have been lifted upward bringing the current Zacks Consensus Estimate for fiscal 2013 to a loss per share of a penny.

RITE AID CORP (RAD): Free Stock Analysis Report

WALGREEN CO (WAG): Free Stock Analysis Report

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

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

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