Rite Aid's Q4'14 Earnings: Wellness Stores Drive Growth

Apr 11 2014, 1:54pm CDT | by

Backed by its store re-modeling initiative, efficient cost management and customer loyalty programs, leading U.S. drugstore chain Rite Aid reported its sixth consecutive quarter of positive net income in Q4 2014. The company witnessed a 2.2% growth in its Q4 2014 revenue primarily on account of an increase in pharmacy gross profit, driven by generic purchasing efficiency as well as an increase in front-end gross profits. Rite Aid’s ongoing expense control measures benefited the company in the quarter. Q4 2014 net income stood at $57 million as compared to $124 million in Q4 2013. However, if we exclude LIFO charges and losses on debt retirement from the results of both years, net income this year was higher by $29 million.

Fiscal 2014 was Rite Aid’s second profitable year in more than five years as the company benefited from its ongoing health and wellness transformation. Though its fiscal 2014 revenue increased only marginally, net income almost doubled compared to fiscal 2013. The company believes that the continued positive growth momentum places it in a position to evolve its strategy from one that focuses on turning the company around to one that emphasizes on growth.

Effectively leveraging its cost structure, investing in new stores and making operational progress remain key focus areas for Rite Aid, as it aims to build a unique brand focused on health and wellness. In fiscal 2014, the company completed additional refinancing to extend maturities and reduce its interest expense, factors that give it the required flexibility to better execute its business plan.

We will update our valuation for Rite Aid after the fiscal 2014 earnings release.

View our detailed analysis for Rite Aid

Wellness Store Remodels Remains A Key Growth Strategy

Loyalty programs such as the Wellness+ program have been one of the key factors driving growth in Rite Aid’s pharmacy sales, as well as front-end sales. The Wellness+ program helps strengthen the relationship with customers, which in turn increases the number of loyalty shoppers at Rite Aid. It remains a key component of Rite Aid’s health and wellness offering. The company made significant progress in transforming its stores into true neighborhood destinations for health and wellness in fiscal 2014. Last quarter, Rite Aid completed 94 remodels, 3 expansions and 2 relocations, taking the total number of Wellness stores to 1,215. It plans to remodel an additional 450 stores in fiscal 2015.

The Wellness store continues to outperform the non-wellness stores in terms of same-store front-end sales and script count. In fiscal 2014, front end same-store sales in the wellness stores exceeded the non-wellness stores by 3.2 percentage point and script growth in the wellness stores exceeded the non-wellness stores by 1 percentage point.

Last year, Rite Aid successfully launched its Wellness65+ program, which is aimed at senior patients who are known to be higher spenders in the pharmacy category. By the end of fiscal 2014, 1.7 million senior citizens had enrolled in the program and Rite Aid claims that the program is attracting new customers as well as strengthening the loyalty of its existing members. According to a 2012 RAND Health study, wellness programs are the rage in corporate America, with half of surveyed companies offering wellness promotion programs.

Rite Aid’s immunization program is another key component of its chain-wide wellness program. It exceeded its chain-wide goal by immunizing more than 3.2 million patients against the flu last year. Its Wellness stores, which feature the Wellness ambassadors, averaged 38% more flu shots than non-wellness stores.

Wellness stores will continue to be a key part of Rite Aid’s growth strategy over the next few years.

Recent Acquisitions To Benefit Rite Aid’s Health & Wellness Strategy
/>

This month, Rite Aid made two acquisitions – Health Dialog Services Corporation and RediClinic – to advance its retail and wellness strategy.

Health Dialog Services Corporation is a health coaching and analytics firm which provides in-store care coaches. Rite Aid believes that the company will play a key role in advancing its Health Alliance program. It expects to benefit from Health Dialog’s industry-leading analytics and shared decision making tools as it focuses on further strengthening its healthcare offering.

RediClinic is a leading retail clinic operator operating across 30 locations in the greater Houston, Austin and San Antonio areas. Post the acquisition, RediClinic will become a subsidiary of Rite Aid. Retail clinics play an importance role in today?s healthcare delivery system and will benefit Rite Aid’s overall health and wellness strategy. Rite Aid intends to leverage RediClinic’s expertise to deliver convenient healthcare and wellness programs to its customers in select markets. Rite Aid plans to open 70 new RediClinic over the next 18 to 24 months.

Rite Aid also announced an expanded tie-up with McKesson Corporation, the largest distributor of pharmaceutical and medical supplies in the US. The new partnerships are in line with the company’s strategy to expand its offerings to cover a broader range of health products and services.

Fiscal 2015 Guidance/>/>

- Rite Aid expects the second half of fiscal 2015 to be stronger than the first two quarters, due in part to the strength in fiscal 2014′s first half as well as the introduction of several new generics in the second half of fiscal 2015.

- Total sales to be between $26 billion and $26.5 billion.

- Adjusted EBITDA to be between $1.33 billion and $1.4 billion.

- Same-store sales to increase by 2.5% – 4.5%, including the anticipated negative pharmacy sales impact of new generic introductions and continued reimbursement rate pressure.

- Earnings per diluted share of $0.31 to $0.42.

- Capex of $525 million.

See More at Trefis | View Interactive Institutional Research (Powered by Trefis)

Like our charts? Embed them in your own posts using the Trefis WordPress Plugin.

 
 

Don't miss ...

 

<a href="/latest_stories/all/all/30" rel="author">Forbes</a>
Forbes is among the most trusted resources for the world's business and investment leaders, providing them the uncompromising commentary, concise analysis, relevant tools and real-time reporting they need to succeed at work, profit from investing and have fun with the rewards of winning.

 

blog comments powered by Disqus

Latest stories

First Italian female astronaut ready for spaceflight
Rome, Nov 24 (IANS) History will be made Monday with the first ever Italian female astronaut set to go into space for a mission on board the International Space Station (ISS).
 
 
Mummy wearing jewellery unearthed in Egypt
London, Nov 23 (IANS) Spanish archaeologists have discovered about 4,000 years old female mummy wearing rare jewellery in Egypt.
 
 
Exercise and fasting could boost brain's functions
Washington, Nov 23 (IANS) Exercise along with occasional fasting is good for boosting the brain's neurons, shows a new research.
 
 
One infant dies in Pakistan hospital
Islamabad, Nov 23 (IANS) One more infant died due to lack of oxygen in an incubator and negligence of the hospital administration in Pakistan, bringing the number of such deaths to 19 in the past five days.
 
 
 

Latest from the Network

At least two people killed in Philippines blast
Manila, Nov 24 (IANS) A bomb blast in the south Philippine province of North Cotabato Sunday killed at least two people, a military official said. According to the official, Jo-ann Petinglay, the bomb was an...
Read more on Politics Balla
 
'Fifty Shades of Grey' brings film offers for Rita Ora
Los Angeles, Nov 24 (IANS) Singer Rita Ora, who has a cameo in long-awaited movie "Fifty Shades of Grey", says it has subsequently brought in more opportunities for her in the film world. The 23-year-old singer is...
Read more on Celebrity Balla
 
First Italian female astronaut ready for spaceflight
Rome, Nov 24 (IANS) History will be made Monday with the first ever Italian female astronaut set to go into space for a mission on board the International Space Station (ISS). Samantha Cristoforetti, a captain in the...
Read more on Business Balla
 
Jennifer Aniston disses Kim Kardashian West's nude photoshoot
Jennifer Aniston has joked that she was one of the ''original'' women who posed nude for a magazine. The 'Horrible Bosses' star - who exposed her bottom on the cover of Rolling Stone magazine in 1996 - compared herself...
Read more on Celebrity Balla
 
Kris Jenner defends Corey Gamble over stalking allegations
Kris Jenner has defended her boyfriend over stalking allegations. The 59-year-old 'Keeping Up With The Kardashians' star - who is currently dating 33-year-old Corey Gamble, following her separation from Bruce Jenner -...
Read more on Celebrity Balla
 
Selena Gomez 'emotional' ahead of American Music Awards
Selena Gomez is ''emotional'' ahead of her performance at the American Music Awards tonight (11.23.14). The 'Come And Get It' hitmaker posted a black and white Instagram video of her at the rehearsals for the AMA's,...
Read more on Celebrity Balla
 
Amber Heard 'unhappy' with Johnny Depp
Amber Heard thinks Johnny Depp made a ''fool'' of himself. The 28-year-old actress and model - who is engaged to the 'Transcendence' star - is ''unhappy'' with her fiance's strange presentation at the Hollywood Film...
Read more on Celebrity Balla
 
One Direction members upset with 'Steal My Girl' performance
London, Nov 24 (IANS) The members of English pop band One Direction felt disappointed when their single "Steal My Girl" didn't make it to number one spot on Britain's music charts. The band, which comprises of members...
Read more on Celebrity Balla
 
Benedict Cumberbatch's hope for new fiancee
Benedict Cumberbatch thinks his fans will like his fiancee. The 'Imitation Game' star - who recently revealed he was engaged to Sophie Hunter - believes his loyal fans will love his future bride because they love him....
Read more on Celebrity Balla
 
Kate Hudson plans birthday presents
Kate Hudson plans her mother's birthday presents years in advance. The 'Almost Famous' star has revealed that she had been planning for years what present to get her mother, Goldie Hawn, for her 69th birthday, which...
Read more on Celebrity Balla