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Rite Aid reports nearly $62 million profit

BY Alaric DeArment

CAMP HILL, Pa. — Rite Aid beat analyst expectations in third quarter 2013 as the generic wave and retention of Express Scripts customers helped drive better-than-expected adjusted EBITDA and produced the company’s first profitable quarter in five years.

"I am proud that we have achieved this significant milestone by putting our customers first and challenging ourselves to better serve them," Rite Aid president, chairman and CEO John Standley said in a conference call with Wall Street analysts Thursday morning.

The company reported sales of $6.2 billion, a 1.2% decrease compared with third quarter 2012’s $6.3 billion due to the introduction of new generics and store closings. Same-store sales decreased by 1.5%, as a 2.7% decrease in pharmacy comps due to new generic introductions offset a 1.1% increase in front-end comps, though same-store prescriptions filled increased by 3.6%, including the addition of new prescriptions from the dispute between Walgreens and Express Scripts. At the same time, the company posted a profit of $61.9 million compared with third quarter 2012’s loss of $52 million. The chain’s last profitable quarter was first quarter 2008, reported in June 2007.

Even though the Walgreens-ESI dispute has been resolved, Rite Aid has managed to retain the "vast majority" of those who moved over, CFO and chief administrative officer Frank Vitrano said during the call.

One reason is that the company has aggressively sought to enroll those customers in the Wellness+ loyalty card program, which had approximately 25 million active members during the quarter, a 5% increase over the same period last year, of whom gold and silver members are the most active. Members accounted for 76% of front-end sales, compared with 72% in third quarter 2012, as well as 67% of prescriptions filled, compared with 66% during the same period last year, leading COO Ken Martindale to call it the "richest and most rewarding program" in the industry. "I think there’s still an opportunity out there to continue to educate people who don’t understand the program," Martindale said, adding that research the company has done suggests that when customers do understand it, it changes their front-end shopping habits for the better and helps retain them.

Another contributor to front-end sales has been the Wellness store format. The chain currently has 687 stores converted to the format and expects to have 780 converted by the end of fiscal year 2013; it also has trained nearly 1,100 Wellness Ambassadors. This has helped contribute to the 300 basis points lift in front-end sales at the Wellness stores compared with non-Wellness stores. In addition, the company plans to expand the updated Wellness store format, currently showcased in the Lemoyne, Pa., store featured in a recent Drug Store News video.

Immunizations have seen a strong boost as well, with 1.8 million immunizations delivered to date and plans to administer 2 million this year, thanks to a stronger flu season. "We’re using this opportunity to educate patients about immunizations and other clinical services," Standley said.

The company’s adjusted EBITDA beat analyst projections, coming in at $277.2 million. Guggenheim Securities had projected adjusted EBITDA of $247.3 million. "We believe the generic wave will power above-trend near-term operating momentum and we would remain buyers of the stock," Guggenheim analyst John Heinbockel wrote in a report to investors.

Wall Street reacted positively as well, as Rite Aid’s stock opened at $1.17 per share and jumped to $1.21 before settling at $1.17 around 10 a.m. EST, having closed at $1.04 per share on Wednesday.

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NACDS’ Jim Huber to retire; David Fitzsimmons named SVP, finance and administration

BY Antoinette Alexander

ALEXANDRIA, Va. — The National Association of Chain Drug Stores announced on Wednesday that Jim Huber, EVP and CFO of NACDS, is retiring after 25 years of service. He will be succeed by David Fitzsimmons has been promoted to SVP of finance and administration.  

Fitzsimmons currently serves as VP finance and accounting. He will succeed Huber effective Dec. 21, 2012.

“As he embarks on his retirement, I thank Jim Huber for his unwavering dedication to NACDS for more than two decades. In planning for a seamless transition and in ensuring successful completion of a host of projects, Jim has provided an excellent example of what it means to finish strong, and now we wish him all the best — we are quite sure he will remain active in many ways,” stated NACDS president and CEO Steve Anderson.

In his new role, Fitzsimmons will report to Anderson and is responsible for all financial and fiduciary operations and policies of the association, including affiliated entities, trusts and investments. He also will be responsible for the preparation of the annual operating budget in concert with the NACDS president, NACDS finance committee and NACDS board of directors.
 
In addition, Fitzsimmons will manage oversight of the association’s technology-related activities, and will work closely with the member programs and services department to meet financial and strategic objectives.  
 
“With Dave at the helm, I am confident that NACDS’ financial position remains in good hands. His expertise and 29-year career in finance make him an excellent choice to lead the association’s financial activities,” Anderson said. “I am pleased to welcome him into his new role and look forward to working with him to maintain NACDS’ position of strength to meet the association’s objectives in the areas of advocacy, communications and member services for the ultimate good of pharmacy patient care.”

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Warburg Pincus acquires majority stake in Crossmark

BY Alaric DeArment

PLANO, Texas — Consumer goods sales and marketing services company Crossmark will merge with an affiliate of private equity firm Warburg Pincus, Crossmark said Wednesday.

The company announced a majority investment by the New York-based firm, saying Crossmark’s management owners would maintain a significant equity position and continue to actively lead the company and that the investment will allow it to achieve its growth objectives faster than it could do on its own.’

"The Warburg Pincus partnership will provide growth capital that will allow Crossmark to make acquisitions, expand our service offerings and further enhance our capabilities to deliver even better service to our clients and customers," Crossmark CEO John Thompson said. "We are pleased to have a partner with a common vision and a track record of backing management with resources, expertise and relationships."

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