CAMP HILL, Pa. — Rite Aid brought the New Year in with a bang, recording monthly same-store sales increases across both the front end and back bench for the first time in almost two years.
In the first hour of trading, Rite Aid stock was up 2 cents to 92 cents, an increase of 2.2%. Rite Aid on Tuesday reported a 0.6% same-store sales increase for the four weeks ended Dec. 25, well above analyst consensus of -1%. Front-end same-store sales increased 0.1%, while pharmacy comparable sales, which included an approximate 201 basis points negative impact from new generic introductions, increased 1%.
Analysts following the drug channel had expected a bullish December. “Industry front-end sales growth will accelerate in December on easier comparisons and increased promotional activity,” said Credit Suisse research analyst Edward Kelly in a research note released Monday. “Sales [across the channel] last year were negatively impacted by low levels of seasonal inventory ... and unusually soft flu activity after an early start to the season,” he added.
And while Rite Aid may be the benefactor of easier comparisons for this month, the chain has initiatives in place to help build from here — namely the company’s Wellness+ loyalty card program and Rite Aid’s segmentation initiative.
As of last month, Rite Aid had signed more than 29 million customers to its Wellness+ loyalty program. As much as 70% of Rite Aid’s front-end sales and 64% of prescriptions (excluding stores in New York and New Jersey) were attributed to a Wellness+ cardholder. Wellness+ cardholders also represent larger market baskets — 50% higher as compared with customers who have not yet signed on.
The program also is expected to benefit pharmacy as it matures — already prescription counts in Wellness+ pilot markets are trending ahead of the chain, and Rite Aid is enjoying a higher retention rate among Wellness+ pharmacy patients versus nonmembers.
Rite Aid also was bullish regarding its low-volume store opportunities going into 2011. The chain opened 10 Save-A-Lot/Rite Aid combination stores in Greenville, S.C. Front-end comparable sales at those stores already are up more than 100%, Rite Aid reported last month. And the chain’s 37 value stores also are doing well, with 10%-plus front-end same-store sales in the company’s third quarter.
Prescriptions filled at comparable stores were up 0.9% for December 2010, and total drug store sales for the four-week period decreased about 0.5% to $2.08 billion. Prescription revenue accounted for 63% of drug store sales, and third-party prescription revenue represented 96.3% of pharmacy sales. Total sales for the 43 weeks ended Dec. 25, 2010, totaled $20.8 billion.
Rite Aid last reported positive front-end comps in November, crediting utilization of its Wellness+ and +UP rewards programs, and same-store pharmacy sales for a month were last in the black in October 2009. But it was earlier that year, in April, that Rite Aid reported positive comparable lifts across both front-end and pharmacy.