Rite Aid's turnaround seeds show signs of growth

Wellness+, Wellness stores help grow sales

WHAT IT MEANS AND WHY IT'S IMPORTANT — The general consensus seems to be that the turnaround that the country's third-largest retail pharmacy chain has engineered over the past few years is working.

(THE NEWS: Rite Aid looks to retain ESI patients, provide 'superior customer experience.' For the full story, click here.)

Rite Aid president, chairman and CEO John Standley said as much during a conference call Thursday to discuss the company's second quarter 2013 earnings, noting the company's "significant progress in our turnaround efforts." Analyst John Heinbockel of Guggenheim Securities seemed to agree, writing in a report, "Our bullish near-term fundamental thesis on RAD remains intact: the combination of generics and the maturation of the Wellness+ program will drive above-trend EBITDA growth for several more quarters."

Wellness+, the loyalty card program the chain launched nationwide in April 2010, has been a major driver of sales, producing many of the chain's most loyal customers. Since its launch, several enhancements have been made, including Wellness+ for Diabetes and, most recently, a feature that allows members to have +UP points loaded to the cards automatically.

The Wellness-format stores already were trending ahead of the older-format stores early on, and they are now showing better front-end sales than the others. Recently, the company unveiled an updated version of the format in Harrisburg, Pa., which includes enhanced decor, product offerings and merchandising presentations. "The Wellness store format is another area of our business that we are constantly looking to refine," Standley told investors Thursday.

When the Wellness+ program and Wellness stores first appeared, one could say that Rite Aid had sown the seeds for a turnaround. Now, based on the results so far, one can say the crops are well on their way to harvest season.

Do you think Rite Aid's turnaround plan is effective? Sound off in the comments below.

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