Wellness+ enhancements, flu immunizations contribute to strong third quarter for RAD

Rite Aid reports increased sales, narrows losses

CAMP HILL, Pa. — Rite Aid experienced stronger sales in third quarter 2012 as it expanded its Wellness+ loyalty card program and saw continued growth in flu immunizations and the Wellness store format, the company said Thursday.

There is little doubt that Rite Aid is getting its biggest bang from its more engaged loyalty card users. Wellness+ members had significantly larger basket rings than nonmembers, with Silver members showing basket sizes 49% larger than nonmembers and Gold members showing basket sizes 120% larger, while Gold and Silver members — those with 1,000 points and 500 points, respectively — accounted for 61% of scripts and 52% of front-end sales within the program. The program now has 47 million members, up from 44 million in second quarter 2012. In addition, 74% of members used their cards within the last 26 weeks, with 50% using them more than once and almost 50% of Gold and Silver members shopping at Rite Aid stores every week. A new Bronze tier has been created for customers who have accumulated 250 points as an incentive for membership.

Wellness+ lately has seen some enhancements as well. More than 90,000 people have enrolled in Wellness+ for Diabetes, and there were more than 200,000 unique visitors to Rite Aid’s section of WebMD, which is partnering with Rite Aid in the program. In addition, the company has plans to roll out Load2Card on Jan. 1, 2012, allowing members to download coupons directly to their cards, while Silver members — those who have accumulated 500 points — will be able to choose “wellness rewards,” such as gym memberships and subscriptions to health and fitness magazines.

“We believe that Wellness+ is the strongest rewards program in our industry,” president and CEO John Standley said in a conference call with investment bank analysts, adding that it was part of the 4,679-store chain’s goal of “finding ways to deliver more value to our most loyal customers” and that he expected enhancements to the program to add “significant value” to it.

Other diabetes initiatives included the 30-city Rite Track Diabetes Tour, a partnership with Johnson & Johnson division LifeScan that kicked off on Nov. 1 in New York with a cooking demonstration by celebrity chef and Type 1 diabetic Sam Talbot. The company also is a member of UnitedHealthcare’s Diabetes Prevention and Control Alliance, which Standley said had expanded in the Washington, D.C., and Baltimore areas.

Rite Aid’s partnership with OptumHealth in the Detroit area, which allows online interaction in the store between a customer and a doctor or nurse, has gained some traction as well. While the program is still in its early stages, the company is considering expanding it.

While its Wellness+ loyalty card program continues to gain traction, the company is perhaps less enthused with results from the new store format that bears the same name. While the Wellness stores show some promise, it appears management is looking for better results from that investment.

The chain has 159 Wellness stores in operation, having completed 119 remodels during the quarter, and is in the process of staffing them with Wellness Ambassadors, specially trained members of the staff who walk the aisles with iPads to answer customers’ questions about medications and other health products and services. It plans to have 300 remodels finished by the end of the fiscal year. Standley said the company would continue to assess the results from the stores and that overall, their comps were “in line” with the rest of the chain, though results from earlier in the fiscal year had shown the Wellness stores tracking somewhat ahead of the other stores. Standley said the stores had higher sales in product categories that were added and lower sales in categories with fewer items.

“They’re not doing terrible — that’s the good news; they’re not where we want them to be on the top line — that’s the bad news,” Standley said, adding that the program, which the company launched this summer, was still in its early stages. “I believe the stores with the Wellness Ambassadors are doing better than the ones without.”

The company closed 18 stores during the quarter and operated a total of 4,679 stores, compared with 4,731 at the end of third quarter 2011.

While saying that the company did not expect a benefit from the ongoing dispute between Walgreens and Express Scripts, it would seek to draw customers from it. “Our goal is to get our fair share of what might come to market if that dispute continues,” Standley said, adding that one-third of Rite Aid’s stores were within a mile of a Walgreens.

A major contributor to pharmacy comps in the quarter was the chain’s flu immunization program, which includes more than 11,000 pharmacists certified to deliver vaccinations. So far, it has immunized 1.4 million customers and expects to immunize 1.5 million this season, more than twice the number of people immunized last year, though Standley said immunizations as well as weather could be a factor in softer cough-cold sales on the front end.

Sales for the quarter were $6.3 billion, a 1.8% increase over third quarter 2011, while the company posted a net loss of $52 million, compared with $79.1 million during the same period last year. Most of the increase came as a result of an increase in same-store sales, which increased by 2% over third quarter 2011. Front-end comps were flat when compared with the same period last year, while pharmacy comps increased by 2.9%. The company expects total sales of $25.85 to $26 billion for fiscal 2012 and a net loss of $325 to $440 million.

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