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GuruFocus has detected 3 Warning Signs with Rite Aid Corp $RAD.
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Rite Aid Corp (NYSE:RAD)
Gross Profit
$7,747 Mil (TTM As of Nov. 2016)

Rite Aid Corp's gross profit for the three months ended in Nov. 2016 was $1,895 Mil. Rite Aid Corp's gross profit for the trailing twelve months (TTM) ended in Nov. 2016 was $7,747 Mil.

Gross Margin is calculated as gross profit divided by its revenue. Rite Aid Corp's gross profit for the three months ended in Nov. 2016 was $1,895 Mil. Rite Aid Corp's revenue for the three months ended in Nov. 2016 was $8,090 Mil. Therefore, Rite Aid Corp's Gross Margin for the quarter that ended in Nov. 2016 was 23.42%.

Rite Aid Corp had a gross margin of 23.42% for the quarter that ended in Nov. 2016 => Competition eroding margins

During the past 13 years, the highest Gross Margin of Rite Aid Corp was 28.82%. The lowest was 23.78%. And the median was 26.86%.


Definition

Gross Profit is the different between the sale prices and the cost of buying or producing the goods.

Rite Aid Corp's Gross Profit for the fiscal year that ended in Feb. 2016 is calculated as

Gross Profit (A: Feb. 2016 )=Revenue - Cost of Goods Sold
=30736.657 - 22910.402
=7,826

Rite Aid Corp's Gross Profit for the quarter that ended in Nov. 2016 is calculated as

Gross Profit (Q: Nov. 2016 )=Revenue - Cost of Goods Sold
=8089.726 - 6194.866
=1,895

Rite Aid Corp Gross Profit for the trailing twelve months (TTM) ended in Nov. 2016 was 2041.556 (Feb. 2016 ) + 1894.3 (May. 2016 ) + 1916.743 (Aug. 2016 ) + 1894.86 (Nov. 2016 ) = $7,747 Mil.

Gross Profit is the numerator in the calculation of Gross Margin:

Rite Aid Corp's Gross Margin for the quarter that ended in Nov. 2016 is calculated as

Gross Margin (Q: Nov. 2016 )=Gross Profit (Q: Nov. 2016 ) / Revenue (Q: Nov. 2016 )
=(Revenue - Cost of Goods Sold) / Revenue
=1,895 / 8089.726
=23.42 %

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

A positive Gross Profit is only the first step for a company to make a net profit. The gross profit needs to be big enough to also cover related labor, equipment, rental, marketing/advertising, research and development and a lot of other costs in selling the products.


Explanation

Warren Buffett believes that firms with excellent long term economics tend to have consistently higher margins.

Durable competitive advantage creates a high Gross Margin because of the freedom to price in excess of cost. Companies can be categorized by their Gross Margin

1. Greater than 40% = Durable competitive advantage
2. Less than 40% = Competition eroding margins
3. Less than 20% = no sustainable competitive advantage
Consistency of Gross Margin is key

Rite Aid Corp had a gross margin of 23.42% for the quarter that ended in Nov. 2016 => Competition eroding margins


Related Terms

Cost of Goods Sold, Gross Margin, Revenue


Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

Rite Aid Corp Annual Data

Feb07Feb08Feb09Feb10Feb11Feb12Feb13Feb14Feb15Feb16
Gross_Profit 4,6896,6387,0366,8246,6936,7937,3187,3247,5777,826

Rite Aid Corp Quarterly Data

Aug14Nov14Feb15May15Aug15Nov15Feb16May16Aug16Nov16
Gross_Profit 1,8951,9231,9561,8601,9222,0032,0421,8941,9171,895
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