Rite Aid Corporation (RAD, Financial) is one of the leading retail drugstore chains in the United States. It sells prescription drugs and a range of other merchandise, which it calls front-end products. Front-end products include over-the-counter medications, health and beauty aids, personal care items, cosmetics, household items, beverages, convenience foods, greeting cards, seasonal merchandise and other everyday and convenience products.
RAD has a strong presence on both the East and West Coasts. Rite Aid is the largest drugstore chain on the East Coast and the third-largest in the United States.
Rite Aid is one of the nation's leading drugstore chains with nearly 4,600 stores in 31 states and the District of Columbia and fiscal 2015 annual revenues of $26.5 billion.
Fourth Quarter Results
Sales
Fourth quarter: Same store sales increased by 4.5% from the prior year period (including a 5.7% increase in pharmacy sales and a 2.0% increase in front-end sales).
The number of prescriptions filled in same stores increased 3.5% over the prior year period. Prescription sales accounted for 68.1% of total drugstore sales, and third party prescription revenue was 97.5% of pharmacy sales.
Full year: Same store sales increased by 4.3% (including a 5.8% increase in pharmacy sales and a 1.2% increase in front end sales).
The number of prescriptions filled in same stores increased 3.5% over the prior year period. Prescription sales accounted for 68.8% of total drugstore sales, and third party prescription revenue was 97.5% of pharmacy sales.
Net Income
Net income for the current quarter was$1.835 billion or Net Income per Diluted Share of $1.79 (an increase from prior year period’s $55.4 million or, Net Income per Diluted Share of $0.06).
Adjusted EBITDA
Adjusted EBITDA for the quarter was $343.3 million (which was a decrease from prior year period’s $356.3 million).
Full year’s Adjusted EBITDA was $1,322.8 million (a decrease from prior year’s $1,325 million).
Income Tax Benefit
There was an income tax benefit of $1.716 billion in the fourth quarter of 2015 and $1.682 billion for full year.
Update of Stores
During the fourth quarter, the company relocated 3 stores, remodeled 115 stores and expanded 2 stores, bringing the total number of wellness stores chainwide to 1,634. The company also opened 1 store, acquired 2 stores and closed 5 stores, resulting in a total store count of 4,570 at the end of the fourth quarter.
For the full year, the company relocated 14 stores, acquired 9 stores, remodelled 440 stores, expanded 5 stores, opened two stores, and closed 28 stores.
Projections for 2016
The company expects the following for the year 2016:
- Sales are expected to be in the range of $26.9 billion-$27.4 billion.
- Adjusted EBITDA is expected to be around $1.250 billion-$1.350 billion.
- Net income for the year 2016 is expected to be in the range of $190 million-$275 million or income per diluted share of $0.19 to $0.27.
- Cash tax payments to remain in a range of $10 million-$20 million.
5. It plans to take it wellness+ loyalty program to the next level through wellness+ with Plenti, which is part of the first national coalition loyalty program in the United States.
(Source: Company’s Website)
Focus at the Moment
Trends like the aging U.S. population and expanded access to health insurance through the Affordable Care Act will place enormous demands on the U.S. health care system. It is building up its real estate pipeline for future relocations and stores. By pursuing opportunities to build new stores, it can further develop underpenetrated markets and enter adjacent markets that have positive demographics for their business. It is concentrating on expanding its health care offerings to meet the pace of changing demands.
In the year 2015, it continued to solidify the pharmacy services by administering a company
Record of 3.7 million immunizations, facilitating additional pharmacist-patient consultations through its new ‘‘Quit for You’’ smoking cessation program, and launching Vaccine Central, a comprehensive set of online and in-store tools that promote the availability and importance of all vaccinations.
The company is taking initiatives to grow sales and drive operational efficiencies. The company recently announced that its wholly owned subsidiary RediClinic and MultiCare Health System (a leading, not-for-profit health care organization that offers a comprehensive network of services across the Puget Sound region) have entered into a joint venture to expand access to healthcare services in the greater Seattle area. Through this joint venture, it aims to provide high-quality, convenient and affordable healthcare to the communities it serves.
On an Ending Note
Rite Aid is well positioned to provide an even higher level of care to help meet this growing demand, drive positive health outcomes and find ways to help lower health care costs.
2015 has been a year of growth and transformation in which RAD continued to generate strong financial results while making important strategic investments to further its position. It has delivered growth in same-store sales and prescription count, strategically increased capex and effectively managed expenses to record third consecutive year of increased profitability.
RAD is doing all it takes to foster its growth. It has upgraded its stores and is concentrating on expanding its product lines. The company has the potential to excel in the times to come. Pharmacy stocks have always been an investors’ favourite. It has strong fundamentals and the projected numbers are good. It is focused on leveraging cost structure and investing in new stores. Backed by customer loyalty programs, remodelling efforts and initiatives to cut costs, RAD is still on the right track.
