Rite Aid's Wellness format passes 1,000-store mark in second quarter

CAMP HILL, Pa. — Rite Aid posted its fourth-consecutive profitable quarter Thursday as it reached a milestone in its store conversions and saw growth in the latest expansion to its loyalty program.

During the second quarter of fiscal year 2014, the number of stores in the chain that have been converted to the Wellness and Genuine Well-Being formats passed 1,000, with the total number of stores converted totaling 1,019 — including 114 under the newer Genuine Well-Being format — and expected to reach 1,200 by the end of the year. In a conference call with financial analysts to announce the quarter's results, CFO Frank Vitrano said Wellness stores' front-end same-store sales led non-Wellness stores' by 3.4%, while same-store script count led by 0.9%. One key part of the Wellness format is the Wellness Ambassadors, specially trained staff who help customers with questions they have about health and wellness products and also help to funnel them toward the pharmacy; as of the end of the quarter, there were 1,700 Wellness Ambassadors working in stores.

Wellness65+, a supplement to the Wellness+ loyalty card program aimed at elderly customers, had 930,000 members enrolled as of the end of the quarter, and president and COO Ken Martindale said that seniors had been "very receptive" to it. Part of the promotional efforts around the program included a tour around the country, with 65 events in eight markets, thus allowing employees to build relationships with senior customers. Other wellness-related programs include flu vaccinations, and chairman and CEO John Standley said they were off to a "strong start" in the 2013-2014 flu season; the company aims to vaccinate 2.5 million people during the fiscal year.

As the chain cycles through the customers it gained during the dispute last year between Walgreens and Express Scripts, same-store script count was flat compared with second-quarter 2013, but offset by organic script count growth. Pharmacy same-store sales were up by 1.7% and included a 2.5% negative effect from new generic introductions. Standley said during the call that new generics have been stronger than expected, but cost increases for generics have also been higher, and the company expects that to put pressure on the company's guidance over the next two quarters.

Sales for the quarter were $6.3 billion, up from $6.2 billion in second quarter 2013, while profits were $32.8 million, compared with a $38.8 million loss a year ago. Same-store sales were up by 1%, including the aforementioned increase in pharmacy comps and a 0.3% decrease in front-end comps. The chain operated 4,604 stores.


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