Rite Aid Corporation RAD came out with its sales data for the month of October, wherein the company’s comparable-store sales (comps) for the four weeks ended Oct 24, 2015 climbed 1% year over year, reflecting an increase in pharmacy comps.
Shares of this Zacks Rank #4 (Sell) company have dropped 2.2% since the October sales release.
Pharmacy comps went up 1.7%, including a negative impact of nearly 249 basis points from generic drug introduction. Further, prescription count at comparable stores inched up 0.2% year over year, while front-end comps slipped 0.5%.
Rite Aid’s total drugstore sales for the month came in at $2.086 billion, up 1.4% from the year-ago figure of $2.058 billion. Prescription sales constituted 70.7% of total drugstore sales and third-party prescription sales accounted for 97.9% of pharmacy sales.
The company’s comps jumped 2.2% for the 34 weeks ended Oct 24, 2015. Pharmacy and front-end comps for the period were up 3.0% and 0.3%, respectively, while prescription count at comparable stores rose 0.6%.
Total drugstore sales for the 34-week period improved 2.2% to $17.350 billion from $16.982 billion in the comparable year-ago period. Prescription sales constituted 69.5% of total drugstore sales. Third-party prescription sales accounted for 97.8% of pharmacy sales.
We note that Rite Aid, the nation’s third-largest drug store chain (by store size), operated 4,561 stores in the U.S., as of Oct 24, 2015.
Further, in a recent development, Rite Aid and leading drug store retailer Walgreens Boots Alliance Inc. WBA agreed to merge. This deal, which is expected to close in the second half of calendar year 2016, is likely to create a drugstore behemoth with a superior network that will cater to more health and wellness solutions in stores as well as online. Further, this will intensify Walgreens’ competition with CVS Health Corp. CVS, the second-largest drugstore chain by store size and the largest one by revenue.
The combined company to be formed from the Walgreens-Rite Aid merger will operate over 12,000 stores in the U.S. and fill over 1 billion prescription drugs every day. This compares with CVS Health, which operates about 8,300 stores in the U.S. In an attempt to expand its foothold in the retail pharmacy space and outperform its competitor, Walgreens, CVS Health recently acquired Omnicare for $12.9 billion and took over Target Corporation’s TGT pharmacy business (in Jun 2015) for $1.9 billion.
This latest Walgreens-Rite Aid merger deal has definitely become the talk of the town. However, we would like to see how this drugstore behemoth, if formed, benefits the industry, consumers and shareholders.
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