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Online Strength to Drive Rite Aid (RAD) Amid Supply-Chain Woes
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Rite Aid Corporation has been gaining from increased non-COVID prescriptions and continued momentum at Elixir. Cost initiatives to lower SG&A bode well.
Expanded digital capabilities have long been a growth driver for RAD. The company has been offering home delivery services to customers with an eligible prescription, with the benefit of zero delivery fee. It has also been providing pickup and drive-through services for prescriptions and over-the-counter products at its stores.
RAD launched the Buy Online Pickup In Store initiative to offer better drive-through and curbside pickup options. Continued strength in on-demand delivery, third-party marketplaces, and buy online, pick up at store options remain upsides.
The company expanded Uber Eats, Postmates and Instacart delivery services. It made strategic partnerships with Amazon and Instacart for home delivery. It partnered with DoorDash to offer same-day delivery of non-prescription health, convenience and wellness essentials, and ScriptDrop to expedite the prescription delivery process.
Shipt and Rite Aid also teamed up to provide the same-day delivery of health and wellness products to Rite Aid’s retail footprint across 17 states. Rite Aid collaborated with Afterpay to offer the service of shop online and pay later. The company launched its loyalty program, Rite Aid Rewards, to expand its customer base to improve customer engagement in pharmacy and front-end sales.
Other retailers engaging in similar collaborations for enhancing delivery services are Big Lots (BIG - Free Report) , Walgreens Boots Alliance (WBA - Free Report) and The ODP Corporation (ODP - Free Report) .
Big Lots recently partnered with DoorDash to provide customers in the United States with on-demand delivery of its bargains, treasures and home essentials.
Big Lots will offer more than 36,000 products, including home goods, seasonal décor, bedding, snacks and pantry staples, cleaning products, outdoor essentials, and pet care supplies via the DoorDash app and website.
Walgreens collaborated with Shipt to offer customers thousands of over-the-counter medications, beauty, personal care, household, and convenience items. WBA plans to launch more than 25,000 items to be available for on-demand delivery from more than 6,300 locations nationwide.
The move is in sync with Walgreens’ consumer-centric healthcare strategy. It will also help the company expand its market, particularly regarding medications, which is its core business.
ODP Corporation’s wholly owned subsidiary, Office Depot, partnered with Instacart this March. Through the deal, customers will be offered same-day delivery from more than 1,000 Office Depot and OfficeMax stores across the United States.
The move will allow customers to shop for a variety of office and school supplies from Office Depot, which can then be delivered to their doorsteps in an hour.
Other Growth Plans
Rite Aid has been focusing on strengthening its foothold in mid-market PBM, innovating across its retail and mail-order pharmacy channels, enhancing the in-store experience by curated digital offerings, improving merchandise, and rebranding its image with a new logo.
Its Stores of the Future and the acquisition of Bartell are anticipated to have helped expand the customer base. Alongside this, it launched a loyalty program to improve front-end margins, expanded its brands and enhanced PBM margins via its new rebate aggregation agreement. The company has been making efforts to grow the Elixir membership and reposition its approach to the Elixir Insurance Part D business.
In a recent development, RAD launched 546 newly designed products. It expects to launch more in the second half of this year. The company also remains on track with the plans to open small-format pharmacies in underserved rural markets such as Indiana, upstate New York and Virginia.
The company revealed plans to lower costs via the closures of 145 unprofitable stores, reduced corporate administrative expenses and enhanced efficiencies in worked payroll, and other store labor costs. It intends to reduce costs related to Elixir due to declining membership. The cost initiatives are expected to generate $190 million in savings in fiscal 2023.
Driven by these factors, management issued an upbeat sales view for fiscal 2023. The company anticipates revenues of $23.6-$24 million. The Retail Pharmacy segment’s revenues are likely to be $17.35-$17.65. The Pharmacy Services segment’s revenues are expected to be $6.25-$6.35 billion.
Hurdles on the Way
Rite Aid is currently witnessing muted demand for COVID-19 tests and vaccines. This, along with the adverse impacts of closed stores, and lower membership at Elixir, remains concerning. This led to sluggishness in the Retail Pharmacy and Pharmacy Services segments. In second-quarter fiscal 2023, the Retail Pharmacy segment's revenues fell 1.1%, while the Pharmacy Services segment’s revenues declined 9% year over year.
Also, the company expects weak consumer demand and supply-chain headwinds to persist in the near term. Due to this, management trimmed the adjusted EBITDA view for fiscal 2023. Adjusted EBITDA is anticipated between $450 million and $490 million compared with the earlier mentioned $460-$500 million. For fiscal 2023, adjusted net loss per share is envisioned between $1.52 and 97 cents compared with the loss between 66 cents and $1.19 stated earlier.
Bottom Line
All said, we believe that Rite Aid looks well-positioned to drive growth in the future on the back of online strength, increased non-COVID prescriptions, continued momentum at Elixir and cost-saving initiatives.
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Online Strength to Drive Rite Aid (RAD) Amid Supply-Chain Woes
Rite Aid Corporation has been gaining from increased non-COVID prescriptions and continued momentum at Elixir. Cost initiatives to lower SG&A bode well.
Expanded digital capabilities have long been a growth driver for RAD. The company has been offering home delivery services to customers with an eligible prescription, with the benefit of zero delivery fee. It has also been providing pickup and drive-through services for prescriptions and over-the-counter products at its stores.
RAD launched the Buy Online Pickup In Store initiative to offer better drive-through and curbside pickup options. Continued strength in on-demand delivery, third-party marketplaces, and buy online, pick up at store options remain upsides.
The company expanded Uber Eats, Postmates and Instacart delivery services. It made strategic partnerships with Amazon and Instacart for home delivery. It partnered with DoorDash to offer same-day delivery of non-prescription health, convenience and wellness essentials, and ScriptDrop to expedite the prescription delivery process.
Shipt and Rite Aid also teamed up to provide the same-day delivery of health and wellness products to Rite Aid’s retail footprint across 17 states. Rite Aid collaborated with Afterpay to offer the service of shop online and pay later. The company launched its loyalty program, Rite Aid Rewards, to expand its customer base to improve customer engagement in pharmacy and front-end sales.
Other retailers engaging in similar collaborations for enhancing delivery services are Big Lots (BIG - Free Report) , Walgreens Boots Alliance (WBA - Free Report) and The ODP Corporation (ODP - Free Report) .
Big Lots recently partnered with DoorDash to provide customers in the United States with on-demand delivery of its bargains, treasures and home essentials.
Big Lots will offer more than 36,000 products, including home goods, seasonal décor, bedding, snacks and pantry staples, cleaning products, outdoor essentials, and pet care supplies via the DoorDash app and website.
Walgreens collaborated with Shipt to offer customers thousands of over-the-counter medications, beauty, personal care, household, and convenience items. WBA plans to launch more than 25,000 items to be available for on-demand delivery from more than 6,300 locations nationwide.
The move is in sync with Walgreens’ consumer-centric healthcare strategy. It will also help the company expand its market, particularly regarding medications, which is its core business.
ODP Corporation’s wholly owned subsidiary, Office Depot, partnered with Instacart this March. Through the deal, customers will be offered same-day delivery from more than 1,000 Office Depot and OfficeMax stores across the United States.
The move will allow customers to shop for a variety of office and school supplies from Office Depot, which can then be delivered to their doorsteps in an hour.
Other Growth Plans
Rite Aid has been focusing on strengthening its foothold in mid-market PBM, innovating across its retail and mail-order pharmacy channels, enhancing the in-store experience by curated digital offerings, improving merchandise, and rebranding its image with a new logo.
Its Stores of the Future and the acquisition of Bartell are anticipated to have helped expand the customer base. Alongside this, it launched a loyalty program to improve front-end margins, expanded its brands and enhanced PBM margins via its new rebate aggregation agreement. The company has been making efforts to grow the Elixir membership and reposition its approach to the Elixir Insurance Part D business.
In a recent development, RAD launched 546 newly designed products. It expects to launch more in the second half of this year. The company also remains on track with the plans to open small-format pharmacies in underserved rural markets such as Indiana, upstate New York and Virginia.
The company revealed plans to lower costs via the closures of 145 unprofitable stores, reduced corporate administrative expenses and enhanced efficiencies in worked payroll, and other store labor costs. It intends to reduce costs related to Elixir due to declining membership. The cost initiatives are expected to generate $190 million in savings in fiscal 2023.
Driven by these factors, management issued an upbeat sales view for fiscal 2023. The company anticipates revenues of $23.6-$24 million. The Retail Pharmacy segment’s revenues are likely to be $17.35-$17.65. The Pharmacy Services segment’s revenues are expected to be $6.25-$6.35 billion.
Hurdles on the Way
Rite Aid is currently witnessing muted demand for COVID-19 tests and vaccines. This, along with the adverse impacts of closed stores, and lower membership at Elixir, remains concerning. This led to sluggishness in the Retail Pharmacy and Pharmacy Services segments. In second-quarter fiscal 2023, the Retail Pharmacy segment's revenues fell 1.1%, while the Pharmacy Services segment’s revenues declined 9% year over year.
Also, the company expects weak consumer demand and supply-chain headwinds to persist in the near term. Due to this, management trimmed the adjusted EBITDA view for fiscal 2023. Adjusted EBITDA is anticipated between $450 million and $490 million compared with the earlier mentioned $460-$500 million. For fiscal 2023, adjusted net loss per share is envisioned between $1.52 and 97 cents compared with the loss between 66 cents and $1.19 stated earlier.
Bottom Line
All said, we believe that Rite Aid looks well-positioned to drive growth in the future on the back of online strength, increased non-COVID prescriptions, continued momentum at Elixir and cost-saving initiatives.