Walgreen Company (WAG), Rite Aid Corporation (RAD): This Stock Keeps Falling Behind

Page 1 of 2

On Thursday morning, Rite Aid Corporation (NYSE:RAD) reported another month of lackluster sales results. For March, same-store sales were down 2%, whereas top competitor Walgreen Company (NYSE:WAG) reported a 0.7% increase in comparable-store sales. (The third pharmacy giant, CVS Caremark Corporation (NYSE:CVS), does not report monthly sales.) Walgreen is continuing to recover strongly from last year’s dispute with Express Scripts Holding Company (NASDAQ:ESRX), and the company appears to be winning market share back from Rite Aid. As a result, I expect Rite Aid’s recent return to profitability to prove short-lived.

Rite Aid Corporation (NYSE:RAD)The details
Rite Aid Corporation (NYSE:RAD)’s sales decline last month was comprised of a 3.8% increase in front-end sales and a 4.5% decrease in pharmacy same-store sales. Much of the decline can be explained by the introduction of various new generic drugs in the past year; generics are cheaper than brand-name drugs, but carry higher margins for pharmacies. It is perhaps more meaningful to look at prescription count, which does not differentiate between brand-name and generic drugs. On that basis, Rite Aid reported a modest 0.3% increase over the prior year.

On the other hand, Rite Aid Corporation (NYSE:RAD) estimated that front-end comparable-store sales benefited by 300 basis points due to the calendar shift of Easter into March. Stripping out all of the moving parts, it appears that Rite Aid’s core sales growth is less than 1%, well below the pace seen for much of the last year.

Competition heats up
Much of Rite Aid Corporation (NYSE:RAD)’s improved performance last year was a direct result of the commercial dispute between Walgreen Company (NYSE:WAG) and Express Scripts, which forced Express Scripts customers to fill their prescriptions elsewhere. While it is difficult to quantify the benefit seen by Rite Aid Corporation (NYSE:RAD) (and other Walgreen Company (NYSE:WAG) competitors), Rite Aid’s management has admitted that pharmacy sales were boosted by the dispute last year. However, as of Sept. 15, 2012, Walgreen’s stores began to accept Express Scripts prescriptions again, and the company has a made a strong push since then to regain lost customers.

Whereas Rite Aid Corporation (NYSE:RAD)’s prescription count in comparable stores increased by just 0.3% last month, Walgreen Company (NYSE:WAG)’s stores saw a 4% increase. Walgreen’s management also commented that “the percentage of former Express Scripts customers returning to its pharmacies continued to increase in March.”

Page 1 of 2
Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

Most Expensive Summer Camps

Most Expensive Animals in the World

Most Expensive Specialty Crops in the World

Movies That Took Ages to Make

The Longest Hollywood Films Ever Made

Most Expensive Concert Stages

The Richest Bands of all Time

10 Most Corrupt Countries 2013 List

10 Countries with the Highest Quality of Life Index

Most Expensive Mattresses in the World

5 Smallest Countries by Land Area

The Ultimate Heartbreak Songs

Richest Teenagers in the World

10 Most Haunted Places in America

10 Best Places to Retire in Florida East Coast

Top 10 Places to See Before You Die

Top 8 Countries in the World Where Justice Prevails

10 Richest States in America

15 Wealthiest Countries in the World

Richest Singers in the World

Most Expensive Tasting Menu in New York City

Most Expensive Baby Items in the World

Most Expensive Hotel Suites in Vegas

Most Expensive Brunch in New York City

Most Expensive Beef Cuts in the World

25 Best Colleges to Get a Job

Top 10 US Supermarkets

The 25 Most Dangerous Cities in the World to Visit

Most Expensive Xbox Games

Top 11 Cities Where Billionaires Live

Top 10 Most Charitable Companies in America

Most Expensive Seafood in the World

The 10 Wildest Conspiracy Theories

The 10 Best Job Markets in the US

Top 10 Accounting Scandals of All Time

The 25 Biggest Cities in the World

Top 10 Best Paying Virtual Jobs

Most Expensive Leather Shoes in the World

Top 6 Things to Buy in March

The 10 Most Stressful Jobs in America – 2014 List

Top 10 Jobs for Introverted People

Top 10 Honeymoon Destinations in the World

Top 10 Highest Paying Jobs in the World

Most Expensive Day-Care in New York City

The 10 Cheapest Places to Retire Abroad

Top 10 Most Expensive Luxury Cars in the World – 2014

Killer Small Business Ideas

The 50 Best Personal Finance Blogs

Most Expensive Apartments in New York City

Bloodiest UFC Fights Ever Fought

Subscribe

Enter your email:

Delivered by FeedBurner

X

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 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!