Drugstore chain Rite Aid Corporation (RAD - Analyst Report) reported a decline of 1% in same-store sales (comps) for the four-week period ended June 30, 2012. The weak comps result were mainly due to decreased pharmacy same store sales, partially offset by improved prescription counts at comparable stores and front-end same store sales.
Pharmacy comps for June 2012 inched down 1.6% including a negative impact of around 672 basis points from new generic introductions. However, front-end same-store sales for the month inched up 0.3%, while prescription count at comparable stores witnessed an upside of 2.9%.
Rite Aid reported total drugstore sales of $1.924 billion in June, with prescription sales accounting for 67.4% of drugstore sales and third-party prescription sales making up for 96.6% of pharmacy sales. The company’s June sales represented a 1.6% decline from the year-ago level of $1.955 billion.
For the 17-week period ended June 30, 2012, Rite Aid registered a comps increase of 1.7%. Comps for the period comprised 2.1% rise in front-end comps and 1.4% increase in pharmacy comps. Prescription count at comparable stores spiked 3.0% for the quarter.
Total drugstore sales of $8.365 billion for the 17-week period reflected a 1% increase from $8.284 billion reported in the year-ago period. Sales for the 17-week period included a 68.2% contribution from prescription sales with third-party prescription sales making up for 96.6% of pharmacy sales.
In an effort to expand its pharmacy and clinical services, Rite Aid has applied additional resources, such as Wellness+ program for diabetes and Flu Immunization program. We believe these programs will enable the company to increase its customer base as well as long-term profitability.
Moreover, the company is in the process of various cost-cutting initiatives including centralized indirect procurement of drugs, administrative headcounts requirement, reducing supply chain costs, reducing debt, etc., which will certainly benefit the company to improve its bottom line.
Headquartered in Camp Hill, Pennsylvania, Rite Aid is the third largest retail drugstore in the U.S. based on revenues and number of stores. The company operates in 31 states across the country and in the District of Columbia. As of June 30, 2012, the company operated 4,648 stores versus 4,703 stores in the same period last year.
Rite Aid competes with CVS Caremark Corporation (CVS - Analyst Report) and Walgreen Co. . Currently, the company has a Zacks #3 Rank, implying a short-term Hold rating on the stock. We are maintaining our long-term Neutral recommendation on the stock.