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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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Walmart, Postmates partner to expand grocery delivery

BY Marianne Wilson

Walmart has brought in a new partner to help it expand its delivery of online grocery orders.

The discounter announced it is teaming up with on-demand delivery service Postmates to help expand Walmart online grocery deliveries to more than 40% of U.S. homes. The initiative will start in Charlotte, North Carolina, and expand in the coming months. It comes on the heels of a previous announcement by Walmart that it plans to expand its grocery delivery business across the United States in 2018, going from six metro areas to 100 during that time.Under the agreement with Postmates, after grocery delivery orders have been picked by Walmart’s personal shoppers, a Postmates courier retrieves the order from a Walmart store and delivers it to the customer during their specified delivery window. (Groceries can be delivered same-day.) There is a $30 minimum order threshold, and a $9.95 fee for the delivery services — with no subscription fee. The first order will be free with a $50 minimum and a special code.

“Both Walmart and Postmates strive to make the lives of our customers easier,” said Dan Mosher, senior VP, merchant lead, Postmates. “With our growing fleet of 160,000 couriers, we are confident that we’ll be providing Walmart customers with the ultimate convenience.”

Postmates is not Walmart’s only delivery partner. Uber and Deliv have been helping Walmart test deliveries in select markets, including Dallas, Denver, Orlando, Phoenix, Tampa and San Jose.

In addition, Walmart offers a free service at 1,200 stores that allows customers to order online and pick up their groceries curbside. The service will be expanded to another 1,000 stores this year.

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