CAMP HILL, Pa. — Rite Aid's same-store sales increased by 1.1% in May, a lower-than-expected increase that may be due to underlying economic and industry factors.
The results for the five weeks ended June 2 included a 1.3% increase in front-end comps and a 1% increase in pharmacy sales over May 2011. Same-store prescription count increased 2.6%. Total drug store sales for the period increased 0.3% to nearly $2.5 billion, compared with $2.45 billion in May 2011.
Credit Suisse analyst Edward Kelly had projected that Rite Aid's comps would increased by 2% to 2.5%, thanks in part to continued weakness from Walgreens. Nevertheless, front-end comps were expected to remain "lackluster" due to weak underlying pharmacy traffic for the industry, economic problems, such as decelerating inflation and challenges to consumers and competition from mass merchandise and dollar stores.
Kelly also has projected that pharmacy script growth would increase but remain weak. In mid-May, IMS Health reported that year-over-year script growth only marginally increased, having been roughly flat in April. At the same time, deflation due to generic drug utilization accelerated even as branded drug inflation remained strong, though Kelly noted that generic utilization results in greater gross profit dollars per script.
The growth in comps for the month also failed to meet Guggenheim Partners' projected growth of 2.2%, but Guggenheim analyst John Heinbockel wrote that the lighter growth would not alter his opinion that Rite Aid would continue to see accelerated EBITDA growth through the end of 2013 due to Wellness+ and other factors.
Results for the 13-week period ended June 2 were somewhat better, with comps increasing 2.5%, including a 2.7% increase in front-end comps and a 2.4% increase in pharmacy comps, as well as a 3% increase in prescription count at comparable stores. Total sales for the period increased 1.8%, to $6.4 billion, compared with $6.3 billion last year.