Rite Aid (NYSE: RAD) is the third largest U.S. drug retailer and has operations in 31 states across the country and the District of Columbia, with revenues exceeding $25 billion. Rite Aid has been going through a rough patch over the past five years, mainly due to its high level of debt. It has been trying to right size its business by closing unprofitable stores across the country and focusing on improving margins by introducing private labels and customer loyalty programs like “Wellness+”.
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Rite Aid has further reduced the total number of operational drugstores to 4,623 as on March 2, 2013, from 4,667 a year ago.  This is in line with our expectation as the company is trying to reduce the number of its non-profitable stores. This will help the company improve its bottom line and also reduce its interest burden to pay off the huge debt. The number of operational stores have decreased from over 5,000 in 2008 to the current 4,623.
In addition to reducing the number of stores, the company plans to remodel 500 stores to its new Wellness format. These stores offer expanded clinical pharmacy services, and new health and wellness product offerings. They are staffed with Wellness Ambassadors who are an add on customer service to provide informed guidance at the stores.
Sales To Decline Over Last Year
Total revenues for the company declined by 0.9% with sales of $25.28 billion in the fiscal year 2012, as compared to fiscal 2011. The lower sales is accentuated by the reduction in number of operational stores during the financial year. Front-end same store sales increased 1.4% while pharmacy same store sales decreased 1%. Prescription count at comparable stores increased 3.4% over the prior year period. With prescription sales representing 67.6% of total drugstore sales as opposed to 68.1% last year, we expect the downward trend in the contribution of prescription sales to total sales to continue. 
We have a price estimate of $1.50 for Rite Aid, which is approximately 15% below the current market price.Notes: