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Rite Aid's Comps Fall Again

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Drugstore chain retailer, Rite Aid Corporation’s (RAD - Free Report) same-store sales (comps) for the four weeks ended December 29, 2012 slipped 2.2%. The fall was an outcome of a decline in pharmacy and front-end comps.

Despite a 4.4% increase in prescription counts, Pharmacy comps for December declined 2.9% primarily due to a negative impact of around 605 basis points from new generic drug introductions. An increase of 1.7% in flu-related prescriptions and flu shots primarily prompted the growth in prescription counts. Further, the shift in holiday calendar resulted in a dip of 1.0% in front-end comps.

Rite Aid reported total drugstore sales of $2.054 billion for the month, with prescription sales accounting for 62.9% of drugstore sales and third-party prescription sales making up for 96.6% of pharmacy sales. The company’s December sales declined 2.7% from the year-ago level of $2.112 billion.

Year-to-date, i.e. for the 43-week period ended on December 29, the company’s comps were up by a modest 0.1%, while net sales slipped 0.6% year over year to $20.913 billion. The increase in comps mainly came from a 1.4% increase in front-end comps partially offset by a 0.6% decrease in pharmacy comps. Prescription sales comprised 67.4% of total sales. Additionally, third-party prescription sales accounted for 96.6% of pharmacy sales.

Peer Performance

Walgreen Company also reported a dull month with December 2012 sales declining 4.0% on a year-over-year basis to gross $6.99 billion. The company’s overall comps declined 6.1%, primarily due to declines of 8.9% and 2.3% in pharmacy and front-end comps, respectively.

Our Recommendation

Rising estimates over the last 30 days – basically due to the company’s solid third-quarter fiscal 2013 results and raised bottom-line outlook – have helped Rite Aid to achieve Zacks #1 Rank, implying a short-term Strong Buy rating.

The company, in December 2012, reported better-than-expected quarterly results for the third quarter of fiscal 2013. Rite Aid’s earnings of 7 cents per share fared better than the prior-year quarter’s loss of 6 cents as well as the Zacks Consensus Estimate of a loss of 4 cents a share. The company’s total revenue of $6.238 billion also swept past the Zacks Consensus Estimate of $6.209 billion.

Bolstered by strong quarterly performance, the company raised its outlook for fiscal 2013, anticipating loss/earnings per share in between a loss per share of 5 cents and earnings per share of 3 cents, up from the previous guidance of loss per share between 9 cents to 23 cents.

Following the company’s revised guidance, all of the 5 estimates have been lifted upward bringing the current Zacks Consensus Estimate for fiscal 2013 to a loss per share of a penny.

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