Don't write off Rite Aid just yet
WHAT IT MEANS AND WHY IT’S IMPORTANT These days Rite Aid comes with the image of a pugilist sprinting up the 72 steps before the Philadelphia Museum of Art with both arms raised high. Because if Rite Aid were a movie, right now it’d be in the midst of its own montage.
(THE NEWS: Rite Aid suffers losses, expects flat performance in fiscal 2011. For the full story, click here)
Yes, Rite Aid’s revenues are down even a bit more than many analysts had expected. And yes, Rite Aid is projecting at the outset a net loss by fiscal year-end 2011. But there is a lot of upside to Rite Aid in the coming year.
For starters, the chain is entering fiscal 2011 with a strong liquidity position, a factor that helps the chain keep swinging for opportunities. It’s what enables the chain to pursue initiatives like its Wellness-plus loyalty card program; or to triple the number of qualified immunizing pharmacists across Rite Aid’s workforce to 6,000 by cough/cold/flu 2010/2011 — both initiatives highlighted by Rite Aid executives during their March 31 conference call.
Rite Aid perhaps is making its biggest push behind its new loyalty card program this year, which is expected to launch chain wide later this summer. It’s a loyalty program that’s successfully made the chain’s existing customer base more productive across its four test markets — enticing many pharmacy patients to shop more often across the front-end, for example. John Standley, Rite Aid president and COO, noted that Rite Aid will be blasting that program out with the biggest marketing push it's made in some time. That kind of big splash will help the Wellness-plus program cut through and distinguish itself from the multitude of loyalty cards already on the market — CVS’ ExtraCare, Duane Reade (a.k.a. Walgreens New York) and their recently revitalized loyalty program and the myriad of supermarket loyalty programs across the country that shoppers carry on their key chains.
At the end of the day, Rite Aid is in a block and tackle mode; or in other words, a movie montage where the protagonist only gets stronger. Because barring any real upsets and/or changes in marketplace dynamics, Rite Aid should be in a better position by this time next year. Short term might look challenging, but Rite Aid is still a favorite for later rounds.