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How Rite Aid Performed in 2Q17

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Part 3
How Rite Aid Performed in 2Q17 PART 3 OF 5

What Drove Rite Aid’s 2Q17 Revenue Decline?

Rite Aid’s 2Q17 top line fell on lower reimbursement rates and same-store sales decline

As outlined in the previous section, Rite Aid (RAD) reported a 4.4% YoY (year-over-year) decline in total sales to $7.7 billion in 2Q17. The company’s Retail Pharmacy segment sales were down 3.4% YoY to $6.3 billion, primarily due to a fall in same-store sales and reimbursement rates. Same-store sales fell 3.4% YoY during the quarter, falling for the fifth straight time. This decline was driven by a 4.6% fall in pharmacy sales and a 0.9% fall in front-end sales.

What Drove Rite Aid’s 2Q17 Revenue Decline?

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Pharmacy Services segment sales were down 8.7% YoY to $1.5 billion as the company decided to participate in fewer Medicare Part D regions. In comparison, CVS Health (CVS) reported a 9.5% YoY increase in pharmacy services revenues, which stood at $32.3 billion in the last reported quarter.

Prescriptions filled fell during the quarter

The number of prescriptions filled in same stores (adjusted to 30-day equivalents) was down 1.8% YoY as the company participated in fewer pharmacy networks. In comparison, prescriptions filled at Walgreens Boots Alliance’s (WBA) comparable stores jumped 8.3% in its last reported quarter.

Rite Aid’s prescription sales accounted for close to 68% of total drugstore sales, while third-party prescription sales formed 98.2% of pharmacy sales. ETF investors seeking to add exposure to Rite Aid can consider the SPDR S&P Retail ETF (XRT), which invests ~1% of its portfolio in the company.

Read the next article to know about the company’s 2Q17 profitability and margins.

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