Rite Aid Reports Another Quarter Of Rising Sales In Q2’14

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Rite Aid

Rite Aid (NYSE: RAD) reported sales for the month of August and Q2 2015 ended August 30, last week. At $2.52 billion and $6.39 billion, total drugstore sales for both August 2014 and Q2 2015, respectively, grew 3.7%. Year-to-date, Rite Aid reported a 3.2% growth in total drugstore sales ($12.91 billion) and a 3.6% annual increase in same-store sales. The company will report its full Q2 2015 earnings on September 18.

Rite Aid reported its biggest quarterly sales gain in fiscal Q1 2015, with a 2.7% annual growth in revenue ($6.5 billion) led by higher same-store sales and same-store prescription counts.  However, due to lower adjusted EBITDA and a higher tax rate, Rite Aid’s net income declined from $89.67 in Q1 2014 to $41.45 in Q1 2015. Nevertheless, the company marked its seventh consecutive quarter of profitability in Q1 2015.

Though Rite Aid expected continued pressure on reimbursement rates and more drug cost increases than normal in Q2 2014 as well, it believes the situation will improve in the second half of the year. The company continues to focus on its store re-modeling initiative, efficient cost management and customer loyalty programs. Controlling costs and making operational progress remain key focus areas for the company, as it aims to build a unique brand focused on health and wellness. The Affordable Care Act is having a positive impact and Rite Aid claims to be experiencing growth in states which have expanded Medicaid.

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View our detailed analysis for Rite Aid

Quick Snapshot Of August & Q2 2014 Sales

Same-store sales for August 2014 increased 3.9% compared to August 2013. Front-end same-store sales increased 1.1% while pharmacy same-store sales grew 5.2%. Prescription sales accounted for 69.3% of total drugstore sales for the month of August. For Q2 2015, same-store sales grew 4.1% compared to Q2 2014. Front-end same-store sales increased 1.1% while pharmacy same-store sales grew 5.6%. Prescription sales accounted for 68.8% of total drugstore sales in Q2 2015. Prescription count at comparable stores grew 3.7% over the prior year period for both August 2014 and Q2 2015.

Wellness Stores Are At The Center Of Rite Aid’s Growth Strategy

Loyalty programs such as the Wellness+ program have been one of the key factors driving growth in Rite Aid’s pharmacy sales, as well as front-end sales. The Wellness+ program helps strengthen relationships with customers, which in turn increases the number of loyalty shoppers at Rite Aid.  It remains a key component of Rite Aid’s health and wellness offering.

The Wellness store continues to outperform the non-wellness stores in terms of same-store front-end sales and script counts. In Q1 2015, front-end same-store sales in the wellness stores exceeded the non-wellness stores by 2.65% and script growth in the wellness stores exceeded the non-wellness stores by 1.2%. As of the end of Q1 2015, Rite Aid has completed 1,325 Wellness remodels, 29% of its total store count.

Some pilot concepts, such as an enhanced OTC presentation that features educational materials, interactive product displays, etc., that have done well in existing Wellness stores will be applied to other Wellness stores in the future. Additionally, Rite Aid is also testing new concepts such as the fresh day cafe to enhance customer experience at its stores.

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