Rite Aid trims losses as loyalty program, new formats drive same-store sales

Sales flat for Q1

CAMP HILL, Pa. — Sales may have been flat overall, but a closer look revealed there was a lot to be positive about in Rite Aid’s fiscal first quarter 2012 earnings, as the company managed significant expense improvement and stronger same-store sales growth. Bottom line: Rite Aid narrowed its losses considerably, and that ain’t all expense control.

Driving the growth in same-store sales is Rite Aid’s Wellness+ loyalty card program, which company president and CEO John Standley told analysts during a June 23 earnings call, currently boasts nearly 40 million members. Card members accounted for 67% of front-end sales during the quarter, Standley said, and 62% of total scripts.

Importantly, Standley explained, Wellness+ card members are emerging as Rite Aid’s most valuable customers. Gold and silver members are shopping both sides of the store, he said, and 50% of these customers are visiting the stores every week, “so we’re getting frequency.”

In addition, Wellness+ members also have higher basket rings than nonmembers, and gold and silver members have higher basket rings than nonmembers. Other highlights during the quarter included expansion of the company’s new Wellness store format. Currently, eight stores are in operation, with the most recent openings in Mechanicsburg, Pa. — a suburb of Harrisburg, Pa., (click here to see photos of the store) — and Newport Beach, Calif. During the call, Standley said the company was planning to open another Wellness store in the Harrisburg, Pa., area.

CFO, chief administrative officer and SVP Frank Vitrano said the company would renovate about 500 stores this year with components of various new formats, including the Wellness, Value and co-branded Rite Aid/Save-a-Lot stores, which the chain operates under an agreement with supermarket operator Supervalu. Vitrano said the company still was working through the overall profitability of the co-branded stores.

While only some initial data were available, sales at the Wellness stores were trending about 100 to 200 basis points higher than the rest of the chain, Standley explained. Front-end sales at the co-branded stores were up 68% year-over-year, and sales at the Value stores were up 140 basis points.

Overall, first quarter 2012 sales at Rite Aid were $6.4 billion, flat compared with first quarter 2011 sales, according to earnings data released Thursday.

The 4,700-store chain had a loss of $63.1 million during the quarter, which ended May 28, compared with $73.7 million in first quarter 2011. Front-end same-store sales were flat, compared with last year, while pharmacy sales increased by 1.1%. Prescriptions filled increased by 0.4%, and prescriptions accounted for 68.7% of total sales. Over fiscal year 2012, the company said it expects sales of $25.7 to $26.1 billion and losses between $370 and $560 million.

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