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Rite Aid’s latest programs show an eye on the future

BY Alaric DeArment

Rite Aid announced its third-quarter 2014 sales Thursday, showing higher total and same-store sales and profits than third quarter 2013, as well as continued growth in programs like the Wellness store format, Wellness65+ and others.

The main story surrounding Rite Aid over the past couple of years has been its efforts to engineer a turnaround, but the message from Thursday was, "Rite Aid more or less has turned around, so what’s next?"

The chain’s stock was trading at $5.18 per share in late-afternoon trading on the New York Stock Exchange Thursday, down from $5.43 at the start of the day after it issued a lower earnings-per-share and narrower adjusted EBITDA guidance for fiscal year 2014, attributing the lower expectations to reimbursement rate and generic pricing pressure, as well as a promotional selling environment on the front end. Much of Thursday’s media coverage of Rite Aid following the release of its earnings focused on this aspect, but these are largely industry-wide problems, not a reflection of Rite Aid’s health as a company.

The 4,595-store chain’s programs are continuing to show promise: Wellness stores, which now account for nearly a quarter of all its stores, are showing noticeably better performance on the front-end and in the pharmacy; the company is investing heavily in initiatives designed to benefit the front-end, including pilot programs like Beauty Vision and a merchandising initiative centered on health products; in addition to its earnings, Rite Aid also announced Thursday an extension of its long-standing partnership with GNC, with president and COO Ken Martindale noting that it would focus much more closely on that partnership than it had before due to having been distracted by its turnaround program.

Much of Rite Aid’s same-store sales growth as of late has come from the pharmacy, but as the numbers from the Wellness stores show, improving the look and feel of its stores can help benefit the front-end as well, and innovative programs like these will probably help drive sales as well; it’s worth noting that early on, one of the stores with a Beauty Vision section had already seen a lift in cosmetics sales.

But there’s a lot to crow about on the financial side too. TheStreet gave Rite Aid’s stock a "Hold" rating, noting a mixture of strengths and weaknesses, one weakness being a gross profit margin of 30.14% that the financial information company called "lower than what is desirable," and a net profit margin of 0.52% that’s behind the industry average. But here’s the good news: Its sales growth has "slightly outpaced" the industry average of 6.3%; the company has seen earnings growth of 160% over the past year, while its stock price has increased by 427.35%, outpacing the rise in the Standard & Poor’s 5000 Index during the same period; and its net operating cash flow has grown by 341.63%, at a time when the industry, on average, has seen it decline by 54.43%.

Notwithstanding the pressures that the industry has been feeling and will continue to feel in the near future, let alone the vagaries of the stock market, Rite Aid’s programs are already panning out, and that’s what really matters in the long run.

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Report: Centrella cooperative considering purchase of 10 Dominick’s stores

BY Michael Johnsen

CHICAGO — The purchase of as many as 10 Dominick’s stores may be under consideration by independent grocery chains affiliated with the Centrella cooperative, Crain’s Chicago Business reported Thursday, citing sources close to the deal. 

Safeway announced in October its intended exit from the Chicago market altogether, where it at one time operated 72 Dominick’s stores, by early 2014. Now approximately 55 remain. 

Four stores were sold to New Albertsons in October. In early December, Safeway announced it had reached a definitive agreement to sell 11 of its Dominick’s stores in the Chicago metropolitan area in a cash and lease assumption transaction to Roundy’s. Roundy’s will take possession of the stores during a transition period that will take place over the next two months. And at least two Dominick’s stores have expiring leases, according to the Crain report. 

 

 

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Marijuana, if legal, should be sold at pharmacies, more than two-thirds of Americans say

BY Alaric DeArment

NEW YORK — While more than half of Americans don’t agree with legalizing the sale and possession of small amounts of marijuana for recreational use, most also say that if legal, it should be sold at pharmacies, according to a new survey.

The survey, conducted for financial media company TheStreet by GfK, found that 53% of Americans oppose legalization, while 69% say that assuming it’s legal, it should be sold at pharmacies. Meanwhile, 60% say it should be sold at specialty stores. Minorities of respondents — 39%, 17% and 13% — say it should be sold in liquor stores, coffee shops and supermarkets, respectively. Broken down by sex, 73% of men would approve of marijuana sales at pharmacies, compared with 62% of women. The survey included 1,011 interviews.

While marijuana remains illegal at the federal level, its use for medical reasons has been legalized in several states, and its recreational use was legalized in Washington and Colorado last year in voter initiatives; those laws are set to take effect on Jan. 1.

Meanwhile, legislation that would allow medical marijuana sales at pharmacies in Michigan has passed both houses of the state’s legislature and is now awaiting Republican Gov. Rick Snyder’s signature.

"We are just starting to see what our country with legalized marijuana will look like, so it’s no surprise that opinions are widely varied when it comes to its sale and distribution," TheStreet analyst Debra Borchardt said. "TheStreet’s survey gauged people’s comfort with hypothetical situations — pot in a supermarket, people under 18 [years] being able to purchase it — and the results showed some big differences between men and women, which surprised us."

A large majority, 80%, support marijuana being regulated as alcohol, while 50% say sales should be limited to people ages 21 years and older. Twenty percent support 18 years as a minimum age to buy marijuana, while 15% say the minimum age should be 30 years, and 7% say there should be no age limit.

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D.Walker says:
Dec-20-2013 11:51 am

This goes against everything most pharmacists stand for... we might as well put tobacco, alcohol and heroin back into pharmacies for monitored dispensing and collection of tax revenues.

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