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Merger decision expected soon, Rite Aid tells associates

BY Michael Johnsen

CAMP HILL, Pa. — In a letter to associates earlier this week, Rite Aid chairman and CEO John Standley, along with Ken Martindale, CEO Rite Aid Stores and president Rite Aid, informed Rite Aid's rank and file that a decision regarding Walgreens Boots Alliance proposed acquisition of Rite Aid is expected soon.

"We greatly appreciate the dedication you’ve displayed during this time and your tremendous efforts to serve our customers and support our fellow Rite Aid associates," Standley noted. "We remain actively engaged in discussions with the FTC to attempt to gain regulatory approval and there can be no guarantee that the merger will be approved. However, we expect a decision sometime soon."

While the delay in merger approval has negatively impacted Rite Aid results, Standley acknowledged, the company is working toward improving performance. "Our Rite Aid team has worked hard over the past few years to develop a robust health and wellness platform that is both strong and unique in the retail drug store space," he noted. "We will continue to build from this strong foundation as we also focus on operational efficiency, investing in growth opportunities and delivering a consistently outstanding experience to our customers and patients."

Rite Aid will post first-quarter fiscal 2018 results on the morning of June 29, which incidentally is the same day Walgreens Boots Alliance will be posting that company's third quarter results for fiscal 2017.
 
 

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Hallmark launches VR Father’s Day cards

BY David Salazar

KANSAS CITY, Mo. — This Father’s Day, Hallmark is looking to capitalize on growing interested in virtual reality. The company has launched virtual reality greeting cards that take the recipient through a  360-degree viewing journey that’s tied to the theme of the card — surfing, motorcycle racing, skydiving and car racing.

“At Hallmark, we are merging digital trends with physical cards to take card giving and receiving to the next level,” Hallmark Greetings Innovation creative director Tom Brantman said. “Our virtual reality cards offer more than a sentiment — they provide a one-of-a-kind experience.”

Each of the four selections features a detachable VR pop-up viewer and instructions. Using their smartphones, recipients can access a website and open the YouTube app, then slide their smartphone into the viewer.

“With the affinity between men and technology, these cards are the perfect way to extend the gift of an experience and elevate the moment for Father’s Day,” Hallmark Greetings Innovation product manager Shannon Ortbals said. “The pop-up VR viewer has a patent pending and is much simpler than other options out there, making it easy for anyone to use.”

And the VR experience won’t be limited to Father’s Day. The company said it planned to launch four new birthday-themed VR card designs this summer.

Hallmark said an estimated 72 million Father’s Day cards exchanged every year, making Father’s Day the fourth-largest holiday for giving greeting cards. This year, the Hallmark Father’s Day card collection includes more than 800 designs, the company said. 

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Fred’s sees pharmacy segment boosts as it posts Q1 loss

BY David Salazar

MEMPHIS, Tenn. — Fred’s Pharmacy posted its Q1 results Tuesday, and though the company swung to a roughly $36.5 million net loss, as its transformation continues, it’s seeing tangible results, particularly in pharmacy and front-end sales in renovated stores. The company also said that it is working with Rite Aid and Walgreens to bolster the case for the Federal Trade Commission to approve Walgreens’ acquisition of Rite Aid that, if approved, would make Fred’s the third-largest drug store chain in the United States

Fred’s said that its net loss was dues to three main factors — $13.5 million after tax for lease liability impairments and expenses that accompanied it closing 39 underperforming stores; $16.9 million for professional and legal advisory regarding it proposed acquisition of Rite Aid Stores and the development and implementation of its growth strategy; and 14.6 million for a valuation allowance against its deferred tax asset from the pretax loss created by these efforts.

Net sales were down 3.1% from $549.5 million in the first quarter of last year and comparable-store sales declined 1.2%, compared with a 1% increase in Q1 last year. The comps in Q! 2017 reflected a negative 1.4% impact from the sale of low productive discontinued inventory, the company noted. Fross profit decreased to $132.9 million from $141.3 million in the year-ago period. But Fred’s CEO Mike Bloom said that the company is on track with its plans and on an upward trajectory.

“Looking ahead, we are focused on executing our key objectives for 2017, including diversifying and optimizing our assets to improve performance and cash flow,” he said. “In large part we are on track with the Fred’s 2017 plan, and doing exactly what we said we would do to optimize Fred’s Pharmacy’s business model and enhance value for our shareholders. We anticipate continued sequential operational improvement excluding non-operating items throughout 2017 as the initiatives underway continue to take hold, and we expect to be profitable on an operational basis by the end of 2017.”

Bloom also said that the company’s pharmacy healthcare transformation — which he pointed to as a key point of differentiation in its market — was driving positive script comps. The company’s pharmacy division saw a total sales comp increase of 3.3% — driven largely by a record quarter for specialty pharmacy sales. At the same time, Fred’s generic dispensing rate increased 100 basis points year over year to 89.6% and retail pharmacy script comps grew 30 basis points.

“Our strong performance in total pharmacy was the primary driver for sequential improvement in our operating performance excluding non-operating items,” Bloom said. “With the right leadership team in place, we continue to enhance our talent, invest in technology, expand the specialty sales force and diversify the specialty portfolio. We also continue to improve the pharmacist-patient relationship, which is reflected in our positive script comps in the retail pharmacy. Both our retail and specialty pharmacy businesses are rapidly improving and driving momentum.”

Also seeing results are the stores whose front ends the company has revamped. Bloom noted that comps in stores remodeled to its new prototype are performing 4% better through April than the chain average.

“In the front store, our remodel program, which will be accelerated in the back half of 2017, is already improving the customer experience and driving sales,” Bloom said.

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