Rite Aid Comps Still in Red - Analyst Blog

Rite Aid Corp. (RAD), one of the nation's leading drugstore chains, reported yet another month of poor same-store sales. After falling 1.7% in October 2010, same-store sales slipped by 1.3% in November. This marks the 18th consecutive month of decline -- since May 2009, when it had registered positive same-store sales of 0.6%.

For the month under review, Rite Aid posted sales of $2,370 million, down 2.3% from the year-ago month.

Front-End Same-Store Sales

As per the company, front-end same-stores sales increased 1.3% in November 2010, a sharp jump from a moderate slide of 1.3% in October 2010.

Prescription Same-Store Sales

Prescription registered a 1.9% cut in same-store sales in November 2010 compared with a reduction of 1.9% in October and 1.3% in September.

Pharmacy Same Store Sales

The company acknowledged that pharmacy same-store sales dropped 2.5% in November 2010, after recording marginal declines of 1.8% and 1.2% in October and September, respectively. Rite Aid said that the introduction of new generic drugs pulled down pharmacy's November same-store sales by 248 basis points.

Quarterly Sales

For the thirteen weeks ended November 27, 2010, same-store sales tumbled 1.3% with Front-End, Pharmacy and Prescription recording flat growth, decline of 1.9% and fall of 1.7%, respectively. Total drugstore sales for the thirteen-week period were $6,180 million compared with $6,329 million in the prior-year period.

Guidance

Rite Aid, the operator of 4,731 drug stores, now expects total sales between $25 billion and $25.4 billion for fiscal 2011. Same-stores sales for fiscal year 2011 are expected in the range of negative 1.5% to break-even.

The company operates in a highly fragmented specialty retail sector and faces intense competition from CVS Caremark Corporation (CVS), Walgreen Co. (WAG) and Wal-Mart Stores Inc. (WMT).

Rite Aid's shares maintain a Zacks #3 Rank, which translates into a short-term Hold recommendation. Our long-term recommendation for the stock remains Neutral.

 
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