What Are Rite Aid’s Key Revenue Drivers?



Rite Aid’s total sales expected to plunge 31% in first quarter

Rite Aid (RAD), which will report fiscal first quarter 2019 results on June 27, is projected to report a 31.6% YoY (year-over-year) decline in total sales to $5.3 billion. However, last year’s sales numbers also include revenue from the 1,932 stores that have now been sold to Walgreens Boots Alliance (WBA).

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How the company has performed recently

Rite Aid’s total sales from continuing operations declined 6.1% YoY to $21.5 billion during the fiscal year ended March 3, 2018. A decline in comparable prescription growth, a fall in reimbursement rates, and a reduction in front-end sales comps drove the company’s top line down. The company missed consensus top-line expectations in three of the four reported quarters.

The company witnessed a deterioration in sales in both of its business segments during the year. The Retail Pharmacy segment, which includes prescription drugs, health and beauty products, and personal care items, contracted 5.6% YoY. Same-store sales from continuing operations fell 2.9% during the year.

The Pharmacy Services segment, which mainly focuses on PBM (pharmacy benefit management) services, witnessed a deterioration of more than 7.8% YoY. This decline was primarily driven by a contraction in the commercial business due to the company’s decision to participate in fewer Medicare Part D regions.

ETF investors seeking to add exposure to Rite Aid can consider the SPDR S&P Retail ETF (XRT), which invests 1.4% of its portfolio in the company.

In the next article, we’ll discuss the company’s profitability and margin expectations.


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