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  • Rite Aid: Take Advantage Of An Unwarranted Pullback [View article]
    Popeye, I agree that McKesson could acquire RAD. But, they probably won't. It would taint their relationship with a bunch of other retail customers who would possibly bail.

    WAG would not be considering RAD because they have their hands full with their other initiatives, primarily with the full acquisition of Alliance-Boots and redomiciling.

    CVS has not done anything to shake the earth in a long time, so they would be more likely to do such a thing, and they can easily handle it from a financial perspective. I doubt anti-trust would be a deal-killing issue, because such a significant percentage of pharmacy is now done through other types of retailers and through the mail. That does not mean they will push the button, however.

    Walmart has been mentioned for a long time, because they are moving to a small format, US sales have languished, and pharmacy is clearly an interest of theirs. Getting access to 4,000+ sites overnight is attractive to them, but let's face it, acquisition is not in their DNA, nor is taking risks.

    Finally, we need to mention ESRX, because they are far and away the most likely suspect here. They would essentially mimic the CVS model, but quickly dwarf them. Given the direction of healthcare in this country, it appears that the ability to provide a complete care package that targets corporate clients and insurance companies is a winning combo. Add to that the fact that ESRXs growth has slowed and everyone knows that PBM margins are going to shrink over time. They will be forced to do something at some point, and this is a move that some very smart people have suggested. If someone else takes out RAD before they do, then there is no good alternative strategy. They cannot afford WAG, regulators would not allow them to take CVS, and building a system from the ground up would take more than a decade.

    There is always private equity, but I don't think that is in the cards. JMO
    Jul 24 06:27 PM | Likes Like |Link to Comment
  • Rite Aid: Take Advantage Of An Unwarranted Pullback [View article]
    I agree with Popeye. Customers do not care where Walgreens is domiciled. This is just a senator grandstanding, because that's what they all do. While it's true that we need tax reform, and the existing regime for corporate taxation in the US is outdated, you can expect to see nothing meaningful for quite some time. If (or more likely, when) WAG does their tax inversion, you will hear a bag full of cats scream about revolt and how they will boycott and so on. And, a month later, it will be over and WAG will have lost 0.001% of their customer base. Think about Walmart for a moment, and for all of the awful press they get for the way they treat employees and suppliers, and how their merchandise is largely produced in overseas sweatshops. And everyone and their brother is threatening to never shop there again, while everyone keeps shopping there. Ironically, one of their strongest demographics is union members. They march and hold signs by day, then shop in the evening.
    Jul 24 06:16 PM | Likes Like |Link to Comment
  • Rite Aid: Take Advantage Of An Unwarranted Pullback [View article]
    Hammerhead, it is a good idea to look not only at how much insiders sell, but how much they still hold. Also, you might notice that insiders that have sold this stock over the past few years now are sitting with regrets. I'll call out Jean Coutu, Mary Sammons, LGP, just to name a few.

    As for hedge funds, saying that you "suspect" they are responsible for the run up and are "probably" exiting is 100% conjecture. When you have the evidence for this, you can post it. And, if the evidence is to the contrary, you can eat your words. Personally, I think your prediction of $5 is way off.
    Jul 24 06:01 PM | Likes Like |Link to Comment
  • Rite Aid: Take Advantage Of An Unwarranted Pullback [View article]
    Popeye, in all fairness, you have to admit that the stock awards for executives and directors are so lavish that they have little incentive to purchase stock in the company. If the price of RAD soars, they all have enough to do quite well, not to mention all of the other incentives they will get (bonuses, etc.). Most financial advisers do caution their clients against owning "excess" stock in their own companies, as it is putting all of their eggs in one basket.
    Jul 24 05:55 PM | Likes Like |Link to Comment
  • Rite Aid: Take Advantage Of An Unwarranted Pullback [View article]
    I wasn't going to say anything further, and I most certainly won't engage in what has been appropriately described as a circular illogic. I will provide a couple of facts, however.

    First, no meaningful debt issues are due until 2018. RAD's credit ratings have continually improved, and they do have the ability to refinance further, if it suits them. By the time the 2018 issues come due, if they have not rolled them out, the total company debt will be something closer to $4 billion. That is, if a buyout has not occurred.

    Second, leased stores are valuable assets, and they are easily sold; it happens all of the time. Valuation depends on many factors, including specific location, market, sales volumes, condition of improvements, and so on. But, it seems that $2 million is a fairly common figure if you want to use the peanut butter approach. In other words, excluding owned real estate, RAD stores would likely fetch something like $9 billion, if sold piecemeal. Owned real estate is probably worth another $1 to $1.5 billion.
    Jul 24 05:53 PM | 1 Like Like |Link to Comment
  • Why Family Dollar Cannot Compete Against Walgreen, Let Alone Wal-Mart [View article]
    I do not follow the dollar store group as investments, but am familiar with them as retailers. I think it is important to recognize the difference between sales growth and profitability. It is not uncommon for a retailer to periodically slow the build out, or contract, and still grow profits. Walgreen's is currently entering this phase, and Rite Aid has been closing poorly performing stores for years (albeit somewhat of a forced course of action, rather than a carefully considered strategic action). It makes sense that the dollar stores should need to rationalize their footprints. I don't imagine this signals their demise, however.

    Here is something that you may want to correct in the article: "Both chains are also placing more emphasis on consumer goods as the popularity of generic drugs cuts into profits from prescriptions." This is not true. Generic drugs are more profitable than branded drugs. The drugstore chains have emphasized non-prescription goods for years, because it is a good way to generate profit in a store, on top of whatever is made from drugs. You can be sure that all of the drugstores will continue to massage the front end mix and attempt to make the most of it, regardless of what is happening with branded versus generic drugs at any given time.

    As for Walmart Express stores, I disagree that they are designed to compete with drugstores and not dollar stores. It is all and none of the above. They are simply designed to compete, which means they will sell whatever they can to meet margin targets. That may include everything from prescription drugs to general merchandise to groceries.

    Walmart corporate doesn't (and shouldn't) care whether the sales they generate would have otherwise gone to Kroger, Walgreen's Family Dollar, or Billy Bob's Bodega. A dollar is a dollar, and the same is true at all of those stores. They are trying to satisfy customers, and as long as the sales and profits arrive, it doesn't matter what store the customer visited last month, as long as they don't go back.

    Ultimately, if anyone loses sales when a Walmart Express moves in, it will probably depend on the locale, proximity to the competition, and demographics. In some cases, the sales may actually cannibalize Walmart Superstores. Time will tell, but the build out is not going to be particularly quick, so I doubt anyone who sees them as a competitor is trembling in their boots at the moment. Furthermore, WMT has had their own set of woes over the past several quarters, and evidently they are not as invincible as once thought.
    Jul 10 02:49 AM | Likes Like |Link to Comment
  • Rite Aid: Take Advantage Of An Unwarranted Pullback [View article]
    coherent commentary, to each their own. If you are buying a balance sheet, then WAG is the winner. If you are buying earnings growth, RAD beats WAG and CVS hands down. Overlay the charts if you have any doubts.

    I any event, let's not toss around terms without understanding what they mean. Insolvency is the inability to pay one's debts. It is not a balance sheet concept; it is about cash flow. So, bringing up lease capitalization in the same sentence as insolvency is nonsense. Take a look at RAD's cash flow statement then rethink what you have said.

    As for lease capitalization, if that really matters to you, remember that accounting entries always involve both debits and credits. If you put the lease liability on the credit side, you also need to debit the asset side of the balance sheet. Leases have value, and locking up a prime corner for 20 years is worth a bundle.
    Jun 20 04:19 AM | 2 Likes Like |Link to Comment
  • Rite Aid Still The Best Stock To Buy In The Retail Drug Space [View article]
    Bruce, Rite Aid effectively released earnings less than two weeks ago:

    http://bit.ly/1jzF4Hv

    We'll get some color tomorrow, but the number itself is no mystery, and any analyst who believes it will be something other than $0.04 is asleep at the wheel. You don't need an "earnings whisper" when the CEO give you an earnings shout.
    Jun 18 06:55 PM | 1 Like Like |Link to Comment
  • Rite Aid Shareholders To Decide On Separation Of CEO And Chairman Position [View article]
    I have often commented on RAD articles here, but took a "vacation" from SA, so am now just catching up (selectively).

    In case anyone cares, I have voted in favor of the shareholder proposal. Regardless of what you think of the current management team, the prospects for stock price appreciation, or the color of the company's logo, it is a best practice to have an independent board of directors, which is impossible when the CEO is also the Chairman.

    In the case of Rite Aid, I realize that there are various versions of what has gone wrong in the past, whose fault it is, and whether or not the ugliness of the past could ever repeat itself. I want to address only one piece of this, because it I think it is exemplary of what might be wrong with the current BOD.

    The acquisition of the Brooks-Eckerd chain proved to be nearly disastrous to RAD. Some of this was because it was ill timed, some due to the terms of the purchase, some because of the condition of the stores that were purchased, but the single greatest contributing factor was the horribly inept job of integrating (or, better put, not integrating) the stores into the chain. Keep in mind that the transaction took quite a long time to close, so the lead time to get this done was unusually long. Yet, with all of this extra time, and all of the assurances given that the integration was going to be seamless, it was botched beyond belief. A properly structured and priced purchase, even on the cusp of a deep recession, could have been moderately successful, if properly managed.

    Mary Sammons was at the helm during this debacle, and should have been fired by the BOD soon afterward. If not then, most certainly after the performance of the company continued into a downward spiral as Mary regularly boasted happier times around the corner while almost simultaneously revising guidance downward. Even after Standley was brought back, Sammons was given what I viewed as an honorary position on the board, along with a huge parting gift.

    So, for those who think the BOD is doing its job, where were they during this episode? If you take a look, some of them are STILL on the board today. As much as I respect the progress that has been made, I would feel more comfortable if there were an independent set of eyes watching over the chicken coup. You just never know when another bad idea is going to be hatched. Or, for that matter, would the current management team vote in favor of being acquired at a fair price if it meant being put out to pasture or only heading a division?

    Also, I wouldn't mind seeing a higher caliber of director than is currently prevalent. These are largely middle management dwellers, former CEO's of small companies, and in one case, a CEO who ran her company into bankruptcy. Even if these people weren't hand-picked by management, I see nobody with the credentials to stand up and challenge the CEO, if needed. A company of this size should have, for example, a retired CEO of Nordstrom, Costco, or Kroger. They should also have a major rainmaker, like Fred Hassan. These people could help guide the company, and would have no qualms about holding management's feet to the fire.
    Jun 17 02:12 AM | Likes Like |Link to Comment
  • France says it opposes GE’s bid for Alstom unit [View news story]
    Rather than walk, GE would do best to let Siemens submit their offer. The agreement they have with Alstrom is that if the deal does not go through with GE because they take another offer, then GE gets a fee equal to 1% or 2% (can't remember which) of the winning deal. If the French want to posture and pretend that they are supportive of an inferior Siemens arrangement, call the bluff and walk away with a big paycheck.
    May 6 01:57 AM | 2 Likes Like |Link to Comment
  • Express Scripts: Just What The Doctor Ordered [View article]
    citizenleung, I tend to agree. PBMs serve themselves, and various analyses have questioned whether the parties at either end of the transaction are saving anything. The discounts they negotiate by leveraging their heft tend to go into their own pockets, not into those of the parties who contracted with them. In the short run, that's a profitable business. In the long run, it's possibly the pathway to extinction. Large pharmacies (WAG, etc.) have begun to struck deals directly with corporate clients, and I suspect this may accelerate. At least one analyst has suggested that ESRX should buy a pharmacy chain.
    Apr 30 01:50 AM | Likes Like |Link to Comment
  • Study: Sales taxes cause Amazon sales to fall 10% [View news story]
    P Man, I was wondering the same thing. Did the sales flow to local businesses, or did people just purchase less because the prices had effectively risen beyond what they were willing to pay?
    Apr 23 02:07 AM | 1 Like Like |Link to Comment
  • GM - Hiding Behind The Shield They Made A Mockery Of [View instapost]
    Moon Kil Woong, my sense is that you have not studied the facts. After you have done your homework, we can discuss the topic. Here's a hint: the bankruptcy was designed by the government (administration), not GM's management. In fact, the government also handpicked the management, so they are one in the same. As for lobbyists, the only ones who were successful were the ones working for the UAW. Bondholders were ripped off, as were taxpayers (this part we agree upon). But, this was then, and this is now. All the current GM is asking for is for due process. Bankruptcy laws are quite specific on this issue. Liabilities of the predecessor company do not belong to the New GM.
    Apr 19 03:43 AM | Likes Like |Link to Comment
  • Kinder Morgan profits drop, but points to growing natural gas demand [View news story]
    Well, the "earnings miss" headline comes straight from Dow Jones, the publisher of Barron's. So, no surprise there. (Not that they would have a bias, of course.)
    Apr 16 09:34 PM | 9 Likes Like |Link to Comment
  • GM - Hiding Behind The Shield They Made A Mockery Of [View instapost]
    Who is the "us" in this screed? The beneficiaries of the bailout were the UAW and the member employees.

    I'm not sure that thumbing one's nose at bankruptcy law (which was the administration's grand idea, so as to gift the UAW at the expense of bondholders and taxpayers) is justification for thumbing one's nose at it a second time.

    "Hopefully, no UAW personnel were harmed." I'm not sure what that is supposed to mean. But, when you consider the UAW's financial stake in the company, which is significant, there is no doubt that ignoring bankruptcy law this second time would harm them quite a bit. Is that what you are demanding here?

    Expect the DOJ to do a slow walk on this until the whole mess fades from the headlines. They know on which side their bread is buttered, and where that butter is churned.
    Apr 16 09:30 PM | Likes Like |Link to Comment
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