Rite Aid Wellness+ Focus Boosts Growth, Fair Value $1.40
Rite Aid (NYSE:RAD), the third largest retail pharmacy chain in the U.S. with over 4,700 locations, has revved up its successful customer loyalty program Wellness+ by introducing a unique coupon management program, Load2Card. The Wellness Plus loyalty program launched in April 2010 has been a game changer for the company over the past few quarters, and the new Load2Card should attract more customers. Rite Aid sells both prescription and non-prescription drugs as well as retail merchandise such as cosmetics and food. Rite Aid competes with Walgreen (NYSE:WAG), CVS Caremark (NYSE:CVS) and Wal-Mart (NYSE:WMT).
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Load2Card Brings More Value to Wellness Cardholders
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Starting January 2012, the Load2Card will allow Wellness+ members to save, manage and redeem Rite Aid and manufacturer coupons available on the Internet via their wellness+ card. Every week, members will have the opportunity to load an average of more than $100 in savings directly to their wellness+ card. Coupon savings will automatically be deducted from applicable purchases when customers scan their wellness+ card at checkout.
Wellness+ members will also enjoy three tiers of savings and rewards in 2012. Adding to the gold and silver wellness+ membership tiers that start at 500 and 1,000 points and receive 10%-20% discount on non-prescription purchases everyday, Rite Aid has created a new bronze tier for members who reach 250 points in a single year. Bronze tier members will receive a 10% discount on all Rite Aid brand products everyday as well as one-time 10% off shopping pass for in-store use.
Wellness+ Program Aids Same Store Sales
Rite Aid is seeing improved top-line with same store sales growth in three consecutive quarters. The key driver for this growth has been the Wellness+ card-based loyalty program that reached 44 million members last quarter, up 10% from previous quarter. Wellness+ members have higher spending levels and a much higher rate of prescription retention, on average, compared to non-members, and they accounted for about 70% of Rite Aid’s non-pharmacy sales during the quarter, up from 60% same period last year.
We have a Trefis price estimate of $1.38 for Rite Aid stock, which is about 15% ahead of the current market price.
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