Analysts seem to be maintaining “Buy” ratings on Rite Aid Corp. (NYSE:RAD) after the company’s same-store sales rose by 2.9 percent, due in part to the growth of the company’s pharmacy section. Deutsche Bank (NYSE:DB) maintains a $7.00 price target on the stock, reports StreetInsider.com.
Rite Aid is currently the number 3 retail pharmacy in the U.S. in terms of sales, behind competitors Walgreens Co. and CVS Caremark Corp., but has been reporting profits for the past three quarters; analysts suspect the boost is due in part to the company’s loyalty program as well as recent renovations that have included expanding the clinical/pharmacy services as well as carrying more health and wellness products, reports the Wall Street Journal.
George Hill, an analyst who spoke to StreetInsider.com said of the company, “we believe the sales report indicates that Rite Aid continues to make progress on improving sales growth through store remodels and closing less productive stores. He added that,”We will be looking for more information in future sales releases on the impact of the flu season to prescription trends. We will also be watching for sales reports from other drug retailers to see if Rite Aid is taking share, possibly indicating more promotional pricing at Rite Aid. Overall, we view the sales report as positive for Rite Aid as the company improves in front of store and adjusted for the impact of the flu looks to be maintaining market share in prescriptions.”
A new challenge for Rite Aid and it’s competitors has been the recent wave of new generic drugs, which hurt sales because they demand lower prices, even though they carry higher margins than their branded counterparts. Rite Aid’s sales of non-pharmacy items rose 1 percent, whereas pharmacy same-store sales rose by 4 percent, despite the 1.02 percent negative impact due to new generic drugs.
Prescriptions fell 2 percent due to a decrease in flu-related prescriptions as well as flu vaccines, reports the Wall Street Journal. Total drugstore sales were up 2.7 percent, to 2.11 billion this month. Shares of Rite Aid closed at $5.04 Thursday, with a 52 week range of $1.26-$6.15, according to StreetInsider.com.