Bright Spots for Rite Aid
Is the 18th time the charm? Well, not for drug retailer Rite Aid (NYS: RAD) , as it recently reported its 18th consecutive quarterly loss. But helped by the good performance of its wellness and loyalty and flu immunization programs, the Pennsylvania-based retailer narrowed its third-quarter losses, brushing aside analysts' estimates. It also offered a propitious outlook for the year.
Loads of losses, but there's a silver lining
Rite Aid's top line crept up 2% from a year ago, to $6.3 billion, and its business continued to grow as it signed on nearly 3 million new members to its customer rewards program and also administered a greater number of flu shots. So far this flu season, Rite Aid has administered more than 1.4 million shots, which is more than double the 675,000 shots delivered last year.
The retailer has struggled to report profit since the middle of 2007 when it acquired the Brooks and Eckerd chains. The company has since borne the weight of heavy debt, at the same time suffering from reduced consumer spending in the U.S. Though consumer spending remains low, it has seen same-stores sales rise in the last four quarters. It has also benefited from cutting costs and refinancing its debt load. It reduced its losses to $52.0 million.
The company has benefited by rolling out a loyalty program and also by renovating and giving its stores a new look. The new stores offer many more health and wellness products to customers and it takes the clinical pharmacy services that Rite Aid offers forward. The main purpose behind the new look is to serve as a conduit between the pharmacy and the front end of the retail section.
Walgreen's loss could be Rite Aid's gain
Rival Walgreen's (NYS: WAG) ongoing dispute with pharmacy benefits manager Express Scripts (NAS: ESRX) may just work to the advantage of peers such as Rite Aid and CVS Caremark (NYS: CVS) . As a result of a contract dispute, Walgreen will terminate the Express contract from January. Thus, customers may have to look for another place to fill prescriptions. Fortunately for Rite Aid, approximately one-third of its locations are within a mile of a Walgreen location. Of course, how many customers this will add to Rite Aid remains to be seen. Walgreen recently announced a plan to retain Express Scripts customers, so it could fall either way. To stay up to date on Rite Aid's turnaround plans simply click here and add Rite Aid to your stock watchlist.
At the time this article was published Fool contributor Shubh Datta does not hold shares in any of the companies mentioned above. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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