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Rite Aid's September Comps Rise 1.5% on Growth Initiatives

Drugstore chain retailer, Rite Aid CorporationRAD , reported healthy sales results for the month of September. The company's comparable-store sales (comps) for the four weeks ended Sep 26 rose 1.5% year over year, reflecting an increase in pharmacy comps.

Pharmacy comps went up 2.2%, including a negative impact of nearly 234 basis points from generic drug introduction. However, front-end comps decreased 0.1% while prescription count at comparable stores dipped 0.7% year over year.

Rite Aid's total drugstore sales for the month came in at $2.059 billion, up 1.8% from the year-ago figure of $2.022 billion. Prescription sales constituted 70.1% of total drugstore sales and third-party prescription sales accounted for 97.8% of pharmacy sales.

The company's comps jumped 2.3% for the 30 weeks ended Sep 26, 2015. Pharmacy and front-end comps for the period were up 3.2% and 0.4%, respectively, while prescription count at comparable stores rose 0.7%.

Total drugstore sales for the 30-week period improved 2.3% to $15.264 billion from $14.924 billion in the year-ago comparable period. Prescription sales constituted 69.3% of total drugstore sales. Third-party prescription sales accounted for 97.8% of pharmacy sales.

We note that Rite Aid is one of the largest drug store chains in the U.S. As of Sep 26, 2015, the company operated 4,562 stores in the country.

The company has been undertaking multiple strategies to drive growth such as the expansion of its pharmacy and clinical services as well as cost reduction. Further, the company has introduced additional resources, like incorporating RediClinics (a healthcare facilities provider) to its stores, inclusion of HealthSpot telehealth booths inside selected stores, its Wellness+ with Plenti program, and the Flu Immunization program to stimulate customer demand.

Though Rite Aid posted better-than-expected results in the second quarter of fiscal 2016, its earnings plunged year over year on account of expenses related to the buyout of EnvisionRx. Based on expectations of additional amortization expenses associated with this acquisition and current sales trends, management lowered its outlook for fiscal 2016. These factors create a negative sentiment, thereby making us somewhat cautious.

Zacks Rank

Rite Aid currently carries a Zacks Rank #4 (Sell). Some better-ranked stocks in the retail drugstore space are GNC Holdings Inc. GNC , Herbalife Ltd. HLF and Walgreens Boots Alliance, Inc. WBA . While GNC Holdings and Herbalife carry a Zacks Rank #1 (Strong Buy), Walgreens Boots holds a Zacks Rank #2 (Buy).

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RITE AID CORP (RAD): Free Stock Analysis Report

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WALGREENS BAI (WBA): 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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