Rite Aid to launch online OTC store powered by drugstore.com

BELLEVUE, Wash. Rite Aid and drugstore.com on Thursday announced a restructured strategic relationship that includes the launch of a new Rite Aid online store for over-the counter products and expands on the two companies' successful long-term relationship.

Under the terms of the agreement, a new Rite Aid online OTC store offering a wide selection of products, including Rite Aid brand items, will be powered by drugstore.com and marketed by Rite Aid to its customer base. Rite Aid's new online store is expected to launch later this year.

As part of the new agreement, the LPU rights (prescriptions ordered online for pick up at a Rite Aid store) will be transferred to Rite Aid. In return, drugstore.com will receive a total of approximately $10 million in ten monthly installments from Rite Aid. Going forward, drugstore.com will receive marketing services revenue for marketing Rite Aid's LPU offering on the drugstore.com site

"Rite Aid has been a strong partner for over nine years, and we are pleased that this new agreement will leverage drugstore.com's leading health, beauty, and wellness ecommerce platform to benefit both companies," stated Dawn Lepore, chief executive officer and chairman of drugstore.com, inc. "Rite Aid will develop marketing programs to drive traffic to the new site, and given the differing demographics, we expect these sales to be incremental to drugstore.com."

"We are excited to partner with drugstore.com, which has the leadership position and expertise in online commerce to provide a very compelling offer to Rite Aid's large and loyal customer base," added Rob Easley, Rite Aid chief operating officer. "Having our own online OTC store and being able to market directly to those customers is an important next step in our digital strategy."

"While the transfer of local pick-up to Rite Aid will have an impact on total revenue, it will significantly strengthen our overall growth rate and gross margins and is consistent with our strategy to focus on our higher growth, higher margin businesses,” Lepore said.

For the third quarter of 2008, drugstore.com is now targeting net sales in the range of $85 million to $90 million and a net loss in the range of $2.7 million to $3.7 million. Adjusted EBITDA guidance remains in the range of $3.5 million to $4.5 million. For 2008, the company is now targeting net sales in the range of $370 million to $380 million and a net loss in the range of $0.2 million to $4.2 million. Adjusted EBITDA remains in the range of $16 million to $20 million.

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