Rite Aid's Slow but Steady Comps - Analyst Blog

Leading drugstore chain operator Rite Aid Corp. (RAD) reported growth of 1.1% in same-store sales for the four weeks ended January 22, 2011. The company reported two consecutive months of same-store sales increase after 18 consecutive months of decline ever since May 2009, when it had registered positive same-store sales of 0.6%.

For the month of January, front-end same-store sales increased 2.2%. Results moved higher from an increase of 0.1% in December 2010.

Pharmacy same-store sales in January improved 0.6% despite a 230 basis point headwind from new generic introductions. Results marginally slithered from a 1.0% increase reported in December 2010.

Prescriptions filled at comparable stores were at par with the prior-year month but slipped marginally from a 0.9% growth in December 2010.

Total drugstore sales came in line with the prior-year month at $1.913 billion for January 2011. In the four-week period, Prescription revenue contributed 69.1% of drugstore sales while third party prescription revenue accounted for 93.3% of pharmacy sales.

Rite Aid reported a year-to-date, same-store sales decline of 0.9%. Front-end same-store sales declined 0.4% and pharmacy same-store sales slid 1.1%. For the 47 weeks ended January 22, 2011, total drugstore sales recorded a year-over-year decline of 2.0% to gross $22.680 billion. Prescription revenue represented 67.8% of total drugstore sales, and third-party prescription revenue accounted for 96.2% of pharmacy sales.

Rite Aid posted a third quarter loss per share of 9 cents, beating the Zacks Consensus Estimate of a loss of 13 cents.

Rite Aid expects fiscal 2011 revenue to be between $25.0 billion and $25.2 billion based on same-store sales decline of 1.5% to 0.9%.  The company expects net loss in the range of $525 million to $655 million (or 60 cents to 74 cents per share).

The Zacks Consensus Estimate for fourth-quarter 2011 is a loss of 21 cents per share. For fiscal years 2011 and 2012, the Zacks Consensus Estimates are a respective loss of 62 cents per share and 47 cents per share.

The company competes with, among others, retail drugstore chains, independently owned drugstores, supermarkets, mass merchandisers, discount stores, dollar stores, and mail order pharmacies. Competitive pressure in the industry is unlikely to subside with continued consolidation, new store openings, and increased mandatory mail orders.

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).

The quantitative Zacks #4 Rank (short-term Sell rating) for Rite Aid Corp. indicates downward directional pressure on the shares over the near term.

Headquartered in Camp Hill, Pennsylvania, Rite Aid Corporation, through its subsidiaries, operates retail drugstores in the United States.

 
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