Sandy Hurts Rite Aid's Comps

Hurricane Sandy that hit the U.S. east coast on October 28 made its effect felt on Rite Aid Corporation’s ( RAD - Analyst Report ) same-store sales (comps) result for the five weeks ended December 1, 2012. While front-end comps of this drugstore chain retailer were affected by 0.4%, the hurricane is estimated to have dented November’s prescription count at comparable stores by 1.5%.

Rite Aid’s overall comps for November 2012 declined 3.0%, while front-end comps decreased 0.5%. Pharmacy comps for the month declined 4.2%, including a negative impact of around 897 basis points (bps) from new generic introductions. However, prescription count at comparable stores climbed 2.2% in November.

Rite Aid reported total drugstore sales of $2.396 billion in the month under review, with prescription sales accounting for 67.6% of drugstore sales and third-party prescription sales making up for 96.6% of pharmacy sales. The company’s November sales declined 2.3% from the year-ago level of $2.452 billion.

Third Quarter Comps

Rite Aid’s quarterly comps (13 weeks ended December 1) were down 1.5%, with sales declining 2% to $6.213 billion in the quarter. The quarterly comps were mainly pulled down by a 2.7% decline in Pharmacy comps, somewhat offset by a 1.1% increase in front-end comps. Moreover, Prescription count at comparable stores rose 3.6% during the quarter.

During the quarter, Prescription sales accounted for about 67.8% of total drugstore sales, while third party prescription sales represented 96.5% of pharmacy sales.

Year-to-Date Comps’ Performance

Year-to-date, i.e. for the 39-week period ended on December 1, the company’s comps were up a modest 0.3%, while net sales slipped 0.4% year over year to $18.859 billion. The increase in comps mainly came from a 1.7% increase in front-end comps and a 3.5% increase in prescription count at comparable stores, offset by a 0.4% decrease in pharmacy comps.

Prescription sales comprised 67.9% of total sales. Additionally, third-party prescription sales represented 96.6% of pharmacy sales.

Peer Performance

Walgreen Company ( WAG - Analyst Report ) , which competes head-to-head with Rite Aid, reported another dull month with November 2012 sales declining 3.9% on a year-over-year basis to gross $5.85 billion. Walgreen’s overall comps declined 6.2%, primarily due to declines of 8.8% and 1.7% in pharmacy and front-end comps, respectively.

Our Recommendation

Currently, Rite Aid has a Zacks #3 Rank, implying a short-term Hold rating. Moreover, we are maintaining a long-term Neutral recommendation on the stock.

Headquartered in Camp Hill, Pennsylvania, Rite Aid is the third-largest retail drugstore in the U.S. on the basis of revenues and number of stores. The company operates in 31 states across the country and in the District of Columbia. As of December 1, 2012, the company operated 4,633 stores as compared with 4,679 stores in the comparable period last year.