The drugstore retail industry should have a good start to the new year. Each industry player is making its mark by playing the right set of cards. Although a shift to generic drugs have affected the margins, each player is witnessing gains in both the top line and the bottom line.
Rite Aid Corporation (RAD, Financial), one of the leading players in this industry, reported a blockbuster quarter recently. Its numbers were ahead of the Street’s estimates, sending its share prices north. Let’s dig in deeper.
The impressive quarter
Revenue for the quarter surged 5.3% to $6.7 billion, over last year. Also, the top line was ahead of the analysts’ estimate of $6.5 billion. Sales were driven by growth in same store sales of 5.4% as well as Medicaid expansion in various states. Also, the company acquired 6 stores during the quarter, which added to the revenue. In addition, it registered a growth of 4.5% in the number of prescriptions filled during the period. In fact, comp sales of non-pharmacy purchases rose 1.7% in December, over the previous month, which shows that people continue to purchase from Rite Aid stores.
Moreover, flu shots during the flu season helped revenue grow. The company gave 3 million flu shots in the first three quarters of 2015. This was mainly because Rite Aid Corp promoted wellness offerings, including flu shots. Thus, company’s associates who help customers in finding products also promoted such program.
Total drugstore sales increased 4.9% to $2.21 billion in December, over the previous month. This was driven by stronger pharmacy sales in its stores. Also, the introduction of new generic drugs resulted in higher sales. However, it resulted in lower margins for the company.
The bottom line jumped to $0.10 per share as against the earnings of $0.04 per share in the prior year. Earnings were higher than the analysts’ estimate of $0.05 per share. The drug distribution agreement with McKesson resulted in cost savings for the company.
Strategies galore
Rite Aid has a number of measures in order to expand its business. Firstly, it plans to expand its health care offerings in the future, which will provide more reasons to the customers to visit its stores.
Also, it introduced a “Quit for you” smoking cessation program. This program is a personalized approach to help people quit smoking. The drugstore retailer expanded the program in the new year, which included sending messages and texts to people to encourage them to quit smoking.
Moreover, it recently acquired RediClinic, a chain of healthcare clinics, in order to expand its presence and improve its wellness offerings. This is in addition to introducing the HealthSpot telemedicine kiosks in selected stores, which helps customers to talk to healthcare professionals through a two way video. Further, it has launched a new customer loyalty program.
Takeaway
Through so many measures, Rite Aid seems to be well equipped for a better year. It also plans to expand the Health Alliance Program across all its stores in order to improve customer traffic as well as the top line. Moreover, the company increased its guidance for the year to a range of $0.31 per share to $0.37 per share from an earlier range of $0.22 per share to $0.33 per share. Thus, Rite Aid Corporation should be the next one on your target list.
