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Ahold Delhaize CEO gives 4 reasons why ‘stores still matter’

BY Michael Johnsen

Companies that can set themselves apart in a crowded landscape will be able to stay ahead, Ahold Delhaize CEO Dick Boer, said during a speech during the Zaandam, Netherland-based retailer’s annual general meeting. The pace of change has accelerated significantly during the seven years he’s served as CEO, and the role of retail is changing thanks to the influence of digital, Boer said.

But that doesn’t mean retail is going away.  Boer outlined four points of differentiation key to the success of each of Ahold Delhaize’s banners. The outgoing CEO said that each of Ahold Delhaize’s banners delivers on shopping experience, uses its expertise in fresh and healthy to benefit the shopper, uses online and digital personalization tools and maintains a leading position in terms of technology and implementing innovation.

Of these four points of differentiation, Boer said experience is perhaps the most critical to the success of a retailer. “Stores still matter,” he said. “And that will be the case in the future, too. The more virtual the world becomes, the more need there is for the real world. Because people are social animals. They like to meet other people. They like to be surprised and inspired. They like to touch, feel and smell new and fresh products.”

Regarding the promise of fresh and healthy, Ahold Delhaize is the only retailer with a goal of having half of all own-brand sales originate from better-for-you products by 2020, Boer said. “We are also making our existing own brands healthier. For example, Stop & Shop, Giant/Martin’s and Peapod reduced the sugar content in their own-brand products by almost 1 million pounds last year.”

Personalization is another key factor that Boer expects will contribute to Ahold Delhaize’s future growth. For example, Food Lion’s Shop & Earn program, referenced in the video above, gives customers an opportunity to earn money back after they’ve capitalized on personalized offers. “Last year, our brands sent out no less than 2.5 billion personal offers worldwide,” Boer said. “Meanwhile, we continue to invest in personalizing the shopping experience even further.”

Finally, technology enables Ahold Delhaize to bring to life many of its market differentiators. He used the example of a Peapod shopper who, despite being blind, was able to use the recently rolled out Ask Peapod voice ordering service as “a great example of how we can continue to reach more customers by using technology.”

Though the tools Ahold Delhaize’s brands are using to retain their customers are new the needs they’re meeting are not, he said.

“Ten years ago, you needed to visit several stores to find the lowest price for a bottle of Coke. Now, you can find the lowest price across five different stores within a few seconds. Ten years ago, only pizzerias offered home delivery. Now, it is perfectly normal to have groceries and restaurant meals delivered right to your kitchen,” Boehr said. “But at the same time, there are some things that never change. One hundred years ago, fine, local products and good personal service were important. That is still the case a century later. A hundred years ago, customers wanted the best quality at the best price. And that will still be the case 100 years from now.”

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Rite Aid revenues drop 6% in FY2018

BY Michael Johnsen

Rite Aid posted revenues of $21.5 billion for its fiscal year ended March 3, on Thursday, marking a decline of 6.1%. Retail pharmacy segment revenues totaled $15.8 billion for the year, which was a decrease of 5.6% that the company primarily attributed to the extra week in the prior-year period and a decline in same-store sales. Revenues in the Camp Hill, Pa.-based company’s pharmacy services segment were $5.9 billion, a decrease of 7.8% compared to the prior year, which was due to a decline in commercial business and to the change in the composition of Medicare Part D membership, Rite Aid said.

Same-store sales from continuing operations for the year decreased 2.9%, consisting of a 3.9% decrease in pharmacy sales and a 0.8% decrease in front-end sales. Pharmacy sales included an approximate 187 basis point negative impact from new generic introductions.

Same-store prescription fills, adjusted to 30-day equivalents, decreased 1.8% over the prior year due in part to the company’s exclusion from certain pharmacy networks that Rite Aid it had been part of in the previous fiscal year. Prescription sales from continuing operations accounted for 65.9% of total drug store sales, Rite Aid said.

For the fourth quarter of fiscal 2018, Rite Aid reported net income of $767.1 million, or 73 cents per diluted share, compared with a loss of $21 million, or 2 cents a share, in the year-earlier period. However, Rite Aid beat analyst estimates. The company’s loss from continuing operations came to 46 cents a share, or adjusted EPS of 2 cents a share, compared with a FactSet consensus for a loss of 3 cents a share. While revenue fell to $5.7 billion for the quarter, that was ahead of the FactSet consensus of $5.6 billion. Shares fell 1.2% in pre-market trading.

For the full year, the company reported net income of $943.5 million, or 90 cents per diluted share.

Rite Aid has much to look forward to in the coming year, executives said. “We are pleased that we’ve been able to drive improved operational performance through a stabilization of reimbursement rates, improvements in drug purchasing costs and a record number of immunizations which helped us deliver a higher pharmacy margin for the [fourth] quarter,” Kermit Crawford, Rite Aid president and COO, said. “These areas of our business will continue to be key priorities as we begin our new fiscal year and work together to continue building momentum.”

Rite Aid chairman and CEO John Standley noted that the retail pharmacy segment improved its earnings before interest, depreciation and amortization over the prior year. He also noted that its pharmacy services segment, which encompasses its EnvisionRx pharmacy benefits manager was kicking off the commercial selling season strongly on the heels of Rite Aid completing its transfer of 1,932 stores to Walgreens Boots Alliance and ahead of its merger with Albertsons. Standley said the merger would “transform Rite Aid into a truly differentiated leader in food, health and wellness,”

With the store transfers complete, the company said that its transfer of the three distribution centers and related inventory is expected to begin after Sept. 1. Rite Aid said it expects the Albertsons merger to close early in the second half of this year, pending shareholder and regulatory approval and closing conditions. Both companies’ boards of directors have approved the deal and a key regulatory waiting period recently expired.

Rite Aid said it expects sales for the coming year to be between $21.7 billion and $22.1 billion in fiscal 2019, with same-store sales expected to range from flat to an increase of 1% over fiscal 2018, the company reported. That forecast does not include the pending merger with Albertsons, however. Net loss for the year is expected to fall between $40 million and $95 million.

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Walgreens Boots Alliance delivers 342nd straight dividend payout

BY Michael Johnsen

Walgreens Boots Alliance on Wednesday declared a regular quarterly dividend of 40 cents per share, an increase of 6.7% over the year-ago period.

Walgreens Boots Alliance and its predecessor company, Walgreens, have paid a dividend in 342 straight quarters (more than 85 years) and have raised that dividend for 42 consecutive years.

The dividend is payable June 12, 2018 to stockholders of record as of May 18, 2018.

Maintaining the kind of growth momentum that enables dividend payouts is a key focus for Walgreens Boots Alliance, executives shared in March, across both the back bench and the front-end.

“Our growth strategy of increasing and consolidating volume, differentiating ourselves through value and quality of service, and controlling costs is bearing fruit across our businesses,” Stefano Pessina, executive vice chairman and CEO Walgreens Boots Alliance, said. “This is reflected in another good set of financial results in which we delivered the highest sales growth in eight quarters, as well as strong cash generation and record U.S. pharmacy market share. We expect to continue to grow, in part through the recent acquisition of stores from Rite Aid, and today we are raising our fiscal 2018 guidance.”

Walgreens executives in March also addressed front-end growth initiatives. Walgreens’ differentiated beauty offering has been rolled out to approximately 2,900 locations to date, and to help deliver a differentiated health offering, the Deerfield, Ill.-based retailer plans to bring to bear its optical, hearing care and lab testing services as part of a new pilot store initiative. “The pilot stores will also provide a platform for the existing initiatives we have already introduced such as our strategic partnership with FedEx,” Alex Gourlay, co-COO Walgreens Boots Alliance, told analysts. “The development of the new store formats and the iterative evolution as we learn more from their performance in the market also provides us with the opportunity to develop a wider range of services and a different value proposition.”

 

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