Drugstore chain retailer, Rite Aid Corporation (RAD) saw the highest improvement in its monthly comparable store sales (comps) in about a decade with comps for the four weeks ended Apr 26, 2014 increasing 5.0%. This marked a significant turnaround in the company’s performance since the start of 2014.
Buoyed by the spectacular comps performance, shares of Rite Aid moved up 5.48% on the index during yesterday’s trade. Shares of the nation’s third largest drugstore chain, following Walgreen Co. (WAG) and CVS Caremark Corp. (CVS), touched a 52-week and multi-year high of $7.90 during the day’s trade before closing at $7.70. This represented the stock’s most spectacular run on the index since 2001, when the stock last hit the 52-week high mark. Moreover, the stock has been a star performer amassing a massive return of 197.3% in one year’s time and about 52.8% year-to-date.
Rite Aid, which also competes with Herbalife Ltd. (HLF), attributed the growth in comps for April to a rise in front-end and pharmacy comps as well as an improvement in prescription count at comparable stores.
Front-end comps for the month reflected 4.7% growth that came primarily on the back of strong Easter-related sales during the month as Easter moved into April this year versus March last year. Of the total comps growth at front-end stores, the company accredited 4.6% to Easter related sales.
Pharmacy comps for April were up 5.2%, which included a negative impact of nearly 138 basis points from generic drug introduction. Moreover, the company witnessed a 2.3% increase in prescription count at comparable stores.
Rite Aid’s total drugstore sales for the month stood at $1.995 billion, up 4.9% from the year-ago figure of $1.902 billion. Prescription sales constituted 67.9% of the total drugstore sales while third-party prescription sales accounted for 97.4% of pharmacy sales.
On a year-to-date basis (8-weeks ended Apr 26), Rite Aid’s comps grew 2.9% primarily due to 4.3% rise in pharmacy comps, while front-end comps declined 0.2%. The company also gained from a 1.7% rise in prescription counts for the period.
Total drugstore sales for the period grew 2.6% to $3,941 billion against $3,841 billion in the year-ago comparable period. Prescription sales constituted 68.7% of total drugstore sales. Third-party prescription sales accounted for 97.4% of pharmacy sales.
Looking ahead, the company’s sustained focus on expanding pharmacy and clinical services through its Wellness+ customer loyalty program and remodeling of wellness stores raise our hopes. We believe that such measures will enable the company to broaden its customer base and boost top- and bottom-line performance.
Rite Aid currently has a Zacks Rank #1 (Strong Buy).
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