Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Walgreen Company (WAG) Is Eating Rite Aid Corporation (RAD)’s Lunch

Page 1 of 2

Back in June, Walgreen Company (NYSE:WAG) reported an earnings miss as the company continued to have trouble driving customer traffic. At the time, Walgreen Company (NYSE:WAG) executives vowed to fight back by ramping up promotional behavior: i.e., offering bigger discounts.

Walgreen is boosting discounts

Since then, Walgreen Company (NYSE:WAG) has come roaring back. The company delivered steady — if not stellar — sales growth in its recently ended quarter. Walgreen’s return to a more promotional stance is starting to damage smaller rival Rite Aid Corporation (NYSE:RAD). A price war plays to Walgreen Company (NYSE:WAG)’s strength as the largest drugstore chain in the country, while it could further undermine Rite Aid Corporation (NYSE:RAD)’s already-meager profit margin.

Rite Aid Corporation (NYSE:RAD)

Walgreen: return to sales growth
While many retailers have performed poorly this summer, Walgreen Company (NYSE:WAG) had no such problems. Front-end (i.e., non-pharmacy) sales in comparable stores increased by 0.8% in June. Sales momentum improved thereafter; comparable-store front-end sales grew 2.3% and 2.2% in July and August, respectively.

For the full quarter, front-end comparable-store sales were up 1.7%. That may not seem very impressive, but it represents a significant sequential improvement compared to the 0.4% gain Walgreen registered in the May quarter. Moreover, Walgreen had posted declines in the four previous quarters. Comparable-store prescription count was up an even stronger 6.8% for the quarter, as Express Scripts Holding Company (NASDAQ:ESRX) customers continued to return to Walgreens stores.

Rite Aid is peaking
The story is quite different at Rite Aid Corporation (NYSE:RAD). While Rite Aid was the biggest beneficiary of the Walgreen-Express Scripts Holding Company (NASDAQ:ESRX) dispute last year, it’s now losing market share to Walgreen once again. Whereas Walgreen reported a 6.8% jump in comparable-store prescription count for the August quarter, the same measure was flat at Rite Aid Corporation (NYSE:RAD).

This loss of prescription market share has afflicted Rite Aid for many months now. However, the company is now starting to feel pressure from Walgreen’s front-end price initiatives as well.

In June, Rite Aid Corporation (NYSE:RAD)’s front-end comparable store sales grew 0.4%, in-line with the company’s trend for this year. In July, this figure ticked up by 30 basis points sequentially to 0.7%, whereas Walgreen saw a much stronger 150-basis-point sequential improvement. Most disturbingly, whereas Walgreen Company (NYSE:WAG)’s comparable-store front-end sales growth remained above 2% in August, Rite Aid Corporation (NYSE:RAD) last week reported a 1.7% drop in that measure for August.

Page 1 of 2

Biotech Stock Alert - 20% Guaranteed Return in One Year

Hedge Funds and Insiders Are Piling Into

One of 2015's best hedge funds and two insiders snapped up shares of this medical device stock recently. We believe its transformative and disruptive device will storm the $3+ billion market and help it achieve 500%-1000% gains in 3 years.

Get your FREE REPORT and the details of our 20% return guarantee today.

Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.
Loading Comments...

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 102% in 3 years!! Wondering How?

Download a complete edition of our newsletter for free!