An announcement by Rite Aid (NYSE:RAD) today could help the company pick up market share in the highly competitive retail pharmacy industry. The company is the third wheel in the industry that also includes Walgreens (NYSE:WAG) and CVS Pharmacy (NYSE:CVS). What is Rite Aid planning that could set it apart?
Today, Rite Aid announced that it would roll out its NowClinic Online Care service in an additional 58 stores. The concept had been tested in nine locations in the Detroit area. New regions that will include NowClinic are Baltimore, Boston, Philadelphia, and Pittsburgh.
Rite Aid became the first retail pharmacy to offer a virtual clinic back in 2011. The company is expanding on this service by offering one-on-one consultations with doctors via video chat. Customers at select Rite Aid stores will be able to have free complimentary conversations with nurses. The new service will allow customers to have a 10 minute consultation with a trained doctor for $45. The doctors will be able to diagnose conditions and write prescriptions for patients.
The new offering could be a nice fit for Rite Aid in its attempt to boost sales and regain market share. Rite Aid is much smaller than its rivals in terms of market capitalization, revenue and store count. Here's a brief look at the comparables:
|Market Capitalization||$1.5 billion||$39.0 billion||$63.5 billion|
|2013 est Revenue||$25.4 billion||$73.4 billion||$125.3 billion|
|Store Count||4626 (01/26/13)||8030 (12/4/12)||7458 (12/31/12)|
As you can see, the other two retail pharmacy companies dominate the industry with sales 3x and 5x that of Rite Aid's. However, investors are undervaluing shares of Rite Aid due to its high debt levels. Walgreen and CVS have market capitalizations that are close to half their yearly sales levels. Rite Aid, on the other hand, has a tiny market cap compared to its annual sales, which could be offering long term investors a huge buying opportunity.
Rite Aid reported January same store sales that were up 0.3%. The company was helped by strong sales of flu-related, over-the-counter products. Prescription count rose 5%, which continued a positive trend for the company. During the third quarter earnings report, Rite Aid reported prescription count that was higher by 3.6% and followed positive results in the first two quarters of +4.0% (Q2) and +3.0% (Q1). Revenue was $6.24 billion, a decrease from last year's $6.31 billion.
Despite a smaller store count, Rite Aid is still a dominate player in the eastern and western regions of the United States. The company has no stores in the middle of the country, with a focus instead on the large population areas. Rite Aid reported in November that 25.5% of the United States population visit one of the company's locations each year. With the new NowClinic locations expanding, visitors could have more reasons to visit a Rite Aid store.
Rite Aid stock has been stuck in penny stock level, trading between $0.95 and $2.12 over the last 52 weeks. Analysts on Yahoo Finance see the company posting earnings per share of $0.00. This comes as a huge improvement from last fiscal year's loss of $0.43. Revenue is expected to fall 2.8% to $25.4 billion. The following year, analysts see the company posting revenue of $25.26. Rite Aid issued guidance of a loss of $0.05 to a profit of $0.03 per share in the fiscal year.
With a share price around $1.67, long term investors have a good entry point for Rite Aid. The company's new NowClinic should boost sales. An expansion of this offering to all Rite Aid locations could significantly help the company's turnaround plans and also reward shareholders.