Rite Aid’s Earnings Review: Growth Driven by EnvisionRx Acquisition

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Rite Aid

Rite Aid, one of the largest pharmacy retail chains in the US, released its Q4 and full-year 2016 earnings on April 7th. The company reported a strong quarter driven by the acquisition of EnvisionRx. Following is a brief look at the numbers and trends that drove Rite Aid’s performance in Q4 and FY 2016.

rad-earnings

Driving Factors for year-on-year growth (FY 2016):
>> Acquisition of EnvisionRx in 2015 led to the entry of Rite Aid in the Pharmacy Benefit Management (PBM) market
>> 1.3% increase in Pharmacy and Front-end Same Store Sales driven by favorable industry dynamics of aging population, increased life expectancy and growth in Medicare part D prescription program
>> Wellness remodel program increased the total number of wellness stores to 2,042 in FY 2016 from 1,643 in FY 2015
>> Incremental Revenues from Health Dialog and Redi Clinic (Both acquired in 2014)
>> The McKesson distribution agreement (extends through March 2019) drive greater supply chain efficiencies

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Key Highlights FY 2016 Onwards:
>> Pending Acquisition by Walgreens will help boost Rite Aid’s business by creating economies of scale and expanding distribution of its beauty brands including Number 7, Soap & Glory, Botanics etc.
>> McKesson distribution agreement will continue to drive supply chain efficiencies.
>> Increased Pharmacy and Front-end same store sales driven by increased store count will positively impact Retail Pharmacy segment revenues
>> Expected 7.1% CAGR in PBM market will continue to positively impact EnvisionRx revenues

Have more questions about Rite Aid (NYSE: RAD)? See the links below:

Notes:

1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com.
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our detailed analysis for Rite Aid

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