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Rite Aid Corp (NYSE:RAD)
Gross Margin
27.89% (As of May. 2014)

Gross Margin is calculated as gross profit divided by its revenue. Rite Aid Corp's gross profit for the three months ended in May. 2014 was $1,803 Mil. Rite Aid Corp's revenue for the three months ended in May. 2014 was $6,466 Mil. Therefore, Rite Aid Corp's Gross Margin for the quarter that ended in May. 2014 was 27.89%.

RAD' s 10-Year Gross Margin Range
Min: 22.6   Max: 29.52
Current: 28.69

22.6
29.52

During the past 13 years, the highest Gross Margin of Rite Aid Corp was 29.52%. The lowest was 22.60%. And the median was 26.76%.

RAD's Gross Marginis ranked lower than
100% of the Companies
in the Global Pharmaceutical Retailers industry.

( Industry Median: vs. RAD: 28.69 )

Rite Aid Corp had a gross margin of 27.89% for the quarter that ended in May. 2014 => Competition eroding margins

The 3-Year average Growth Rate of Gross Margin for Rite Aid Corp was 1.60% per year.


Definition

Gross Margin is the percentage of Gross Profit out of sales or Revenue.

Rite Aid Corp's Gross Margin for the fiscal year that ended in Feb. 2014 is calculated as

Gross Margin (A: Feb. 2014 )=Gross Profit (A: Feb. 2014 ) / Revenue (A: Feb. 2014 )
=7323.7 / 25526.413
=(Revenue - Cost of Goods Sold) / Revenue
=(25526.413 - 18202.679) / 25526.413
=28.69 %

Rite Aid Corp's Gross Margin for the quarter that ended in May. 2014 is calculated as

Gross Margin (Q: May. 2014 )=Gross Profit (Q: May. 2014 ) / Revenue (Q: May. 2014 )
=1803 / 6465.531
=(Revenue - Cost of Goods Sold) / Revenue
=(6465.531 - 4662.552) / 6465.531
=27.89 %

* All numbers are in millions except for per share data and ratio. All numbers are in their own 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 27.89% for the quarter that ended in May. 2014 => Competition eroding margins


Be Aware

If a company loses its competitive advantages, usually its gross margin declines well before its sales declines. Watching Gross Margin and Operating Margin closely helps avoid value trap situations.


Related Terms

Operating Margin, Cost of Goods Sold, Gross Profit, Revenue


Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

Rite Aid Corp Annual Data

Feb05Feb06Feb07Feb08Feb09Feb10Feb11Feb12Feb13Feb14
Gross Margin 25.0227.2126.9427.2826.7626.5826.5426.0128.8228.69

Rite Aid Corp Quarterly Data

Feb12May12Aug12Nov12Feb13May13Aug13Nov13Feb14May14
Gross Margin 24.9427.0427.4529.0431.7228.9428.9328.3228.5827.89
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