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Rite Aid (NYSE:RAD), the third largest domestic pharmacy chain reported February 2013 monthly sales this morning that proved to be highly disappointing driven by a 3.6% year-over-year decline in same store sales coupled with a 3.7% erosion in drugstore sales to $2.457 billion from $2.551 billion in the prior year's period.

The performance was mirrored in all reported areas of the store;

  • Front end sales fell 1.3% Y/Y
  • Pharmacy sales declined by 4.7% Y/Y

Rite Aid did report that the number of prescriptions rose by +0.3% in February. However, as a point of caution, the release did not indicate if the figures were calendar adjusted to account for the additional February 2012 leap day creating a need for additional clarity from the company.

If the reported figures do reflect the calendar adjusted results, we feel that it is increasingly apparent that the boost in customer traffic related to last year's highly publicized contract dispute between Walgreen (NYSE:WAG) and Express Scripts Holding Company (NASDAQ:ESRX) was a short-term phenomena and customers are rapidly migrating back to Walgreen.

The results also significantly conflict with the strong calendar adjusted results reported by Walgreen earlier this week. The company reported a 1.5% increase in sales to $5.75 billion with front end sales rising 1.7%, pharmacy sales 2.0% and prescriptions rose by 6.5% respectively. My full analysis of Walgreen's February results can be also accessed on the SeekingAlpha site.

Rite Aid's January reported results did raise a degree of optimism as same store sales rose in the period by 0.3% but the data point now appears to be more of an anomaly driven primarily by the U.S. influenza outbreak.

It is our opinion that Walgreen's is the superior portfolio option at this point. We feel that the returning customer base is not fully reflected in current valuations and that the company will continue to benefit from the migration of those customers over the intermediate-term.

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Source: Rite Aid Increasingly Inconsequential With February Sales Figures