Rite Aid Corporation (RAD), CVS Caremark Corporation (CVS), Walgreen Company (WAG): Is the Economy to Blame for Drugstore Chains’ Poor Earnings?

Earlier this year, Rite Aid Corporation (NYSE:RAD) had reason for celebration when it logged its first quarterly profit since 2007. This earnings report gave the company its second consecutive quarterly profit, giving investors increased confidence in the chain.

As all three retailers head into the second half of 2013, front-end sales will likely be a priority. Because grocery store chains, Wal-Mart Stores, Inc. (NYSE:WMT), and Target Corporation (NYSE:TGT) all provide the opportunity to pick up prescriptions, consumers see them as a one-stop-shopping experience. What drugstores want is to capture those customers, who will hopefully buy a few extra items while picking up their prescriptions.

How can drugstores compete in this arena? Discounts. With showrooming becoming more prominent than ever, customers can easily see how the milk and bread sold in drugstores compares with the same products at their local grocery stores. Walgreen Company (NYSE:WAG), in particular, has been experimenting with selling its own products, exclusive to its stores, such as its Delish Ice Cream.

Expectations going forward

Walgreen Company (NYSE:WAG), CVS Caremark Corporation (NYSE:CVS), and Rite Aid Corporation (NYSE:RAD) are heading into the summer season with cautious optimism. As they strive to increase front-end sales, will it be enough? Consumers will look at both price and convenience in choosing where to do their shopping, but if past history is any indication, Walgreen will lead and the rest will follow.

The article Is the Economy to Blame for Drugstore Chains’ Poor Earnings? originally appeared on Fool.com and is written by Stephanie Faris.

Stephanie Faris has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Stephanie is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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