Three key milestones show Rite Aid's continued progress
Rite Aid reported its second quarter 2014 earnings Thursday, posting its fourth-consecutive profitable quarter, its passing the 1,000 mark in the number of stores it has converted to the Wellness format and more than 930,000 members of Wellness65+, the latest extension to its Wellness+ loyalty care program, aimed at seniors.
In other words, the country's third-largest drug store chain has once again shown it's on a roll. In light of the latest earnings, the company raised its guidance for fiscal year 2014, expecting a profit of between $182 million and $268 million. The chain's performance has pushed its stock price to a one-year high; it closed at $4.83 on the New York Stock Exchange Monday, up by 3.43%.
While those factors that are within Rite Aid's control — such as its highly successful loyalty card and store conversion programs — continue to hold promise and benefit the company's earnings, there are still headwinds resulting from factors outside its control. Among these, the company cited reimbursement rate pressure, pharmaceutical cost increases and lower benefit from new generics. In a conference call with financial analysts Thursday morning, chairman and CEO John Standley said generic drug costs had been higher and would likely put pressure on guidance over the next two quarters. In his presentation at the National Association of Chain Drug Stores' Total Store Expo last month, IMS Health VP industry relations Doug Long cited rising generics costs as a concern as well.
Nevertheless, it's a testament to Rite Aid's resilience as a company that it still expects to make a profit at the end of the year. Last month, even Jim Cramer of CNBC's "Mad Money" proclaimed, "The group is strong. Rite Aid is back!" Of course, DSN has been saying that for a while.