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Rite Aid's April Comps Fall

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Drugstore chain retailer, Rite Aid Corporation’s (RAD - Free Report) same-store sales (comps) for the 4 weeks ended Apr 27, 2013 slid 4.0%. The fall was due to a decline in pharmacy as well as front-end comps.

Pharmacy comps for April fell 4.2% primarily due to a negative impact of approximately 454 basis points from generic drug introductions and a 0.2% drop in prescription counts. Further, an earlier shift in the timing of Easter caused a lapse of 3.5% at the company’s front-end comps.

Rite Aid reported total drugstore sales of $1.902 billion for the month, with prescription sales accounting for 67.9% of drugstore sales and third-party prescription sales constituting 96.9% of pharmacy sales. The company’s April drugstore sales fell 4.6% from the year-ago level of $1.993 billion.

For the 8-week period ended on Apr 27, Rite Aid’s comps decreased 3.0% primarily due to a fall of 4.4% in Pharmacy comps, partially offset by an increase of 0.1% at front-end comps. In the said period, total drugstore sales decreased 3.5% to $3.841 billion from $3.982 billion in the comparable period of 2012.

Prescription sales comprised 67.7% of total drugstore sales, while prescription counts nudged up 0.1%.  Additionally, third-party prescription sales constituted 97.0% of the pharmacy sales.

Rite Aid, which trails Walgreen Co. and CVS Caremark Corp. (CVS - Free Report) in terms of store count, has persistently witnessed a decreasing sales trend over several quarters due to the introduction of lower cost generic (non-brand) drugs. Generic drugs are less expensive but generate higher gross margins for the company. This is evident from the fact that in the fourth quarter of fiscal 2013, generic medications were the primary drivers of margin expansion. Going forward, this Zacks Rank #2 (Buy) stock is likely to focus on expanding its portfolio of generic medications as the demand for generic drugs is growing consistently.

However, Rite Aid’s generic drug sales could be adversely affected by Wal-Mart Stores Inc.’s (WMT - Free Report) entrance into the retail generic drug market. Due to Wal-Mart’s wide array of manufacturers in India, Israel, and the U.S., the mass merchant can offer generic drugs at a more discounted price compared with the average $10.00 generic drug co-pay.

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