Rite Aid Sales Momentum Continues In March

Apr. 3.14 | About: Rite Aid (RAD)


Company-wide adjusted sales increased by 1.7% for March.

Rx Scrip counts increased by 1.1%.

Sales increase with fewer stores indicates higher profit potential for 2015.

Rite Aid (NYSE:RAD) reported sales for March today, and once again, results showed steady and consistent improvement in both same-store sales and overall company sales. The company reported that same-store sales increased 0.7% and total sales increased by 0.4% in March. However, these results were skewed due to Easter being in April this year vs. March last year. The company reported that front-end sales were lower by 4.1% as a result of not having Easter sales in March. My calculation below shows that total sales for March would have increased by 1.7% if Easter had fallen in March.

RAD March, 2014 sales adjusted for Easter
Total sales March, 2013 - $1,939
Total sales March, 2014 - $1,947
Rx sales (69.4%) - $1,351
Front-end Sales (30.6%) - $596
Easter impact (-4.1%) - $24
Total Sales adjusted for Easter - $1,971
Adjusted March Sales % increase - 1.7%
* $ in Millions, All numbers from April 3rd, 2014 RAD press release
Click to enlarge

Note, April's comparison for front-end sales should reflect a corresponding increase over the prior year to offset March's decline.

It is important to note that Rx same-store sales increased 3.5% and Rx Scrip counts increased 1.1%. The Rx Scrip count increase was an improvement over recent monthly results, and is an important metric for retail drugstores, as it is the core business.

Additionally, this month's sales increase was achieved with 37 fewer stores than in 2013.

The company had previously reported fiscal Q4, 2014 sales of $6.567 billion, a 2.2% increase in total sales (RAD March 6th, 2013 Press Release) and with 36 fewer stores at quarter-end than the previous year.

Rite Aid's incremental sales increases should have a disproportionally higher impact on net profits due lower expenses from a lesser number of stores. As a result, Rite Aid's sales releases should provide a good forecast for the company's earnings results to not only meet, but exceed analysts' forecasts.

I reviewed Rite Aid's stock price potential in my last article, based on EBITDA multiples which are much lower than its 2 largest competitors (WAG and CVS). As long as Rite Aid continues to increase sales (and corresponding profits and EBITDA), I am confident the stock can provide an excellent return for investors.

This sales report is a very good start to RAD's new fiscal year and another positive sign for continued stock gains in 2014. As always, there are risks with any investment, and in a follow-up article, I will highlight what I perceive to be the biggest risk to RAD's stock price for fiscal 2015.

Disclosure: I am long RAD and plan to hold. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.