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Rite Aid bets new Rx loyalty program keeps share gains coming


NEW YORK —One of the key accomplishments touted by Rite Aid executives last month at its annual meeting here was that pharmacy sales are trending positive and the chain is gaining market share in this tough economy, as evidenced by its 2.2% increase in overall script count. “A pretty significant turnaround for us,” said John Standley, Rite Aid president and COO.

“Our improvement in script count this quarter resulted primarily from the growth of our Rx Savings Card with over 2.6 million customers enrolled at the end of the quarter [up almost 1 million since last quarter], the benefit from our grassroots marketing initiative which has driven script count growth in our high-volume-front-end/low-volume-pharmacy stores, our automated refill-reminder program and the growth in our courtesy refill program with 2.2 million customers enrolled at the end of the quarter,” Standley said during a conference call with analysts the day before the shareholders meeting, adding that script count growth had remained strong in June.

Rite Aid’s free Rx Savings Card includes a 20% discount on all generic medications and most branded drugs, and offers more than 500 generic medications at a flat $8.99 for a 30-day supply or $15.99 for a 90-day supply. The card also is good for a 10% savings on all Rite Aid store brands.

And this fall, Rite Aid will begin looking to capitalize on its increased market share with the test market of a new prescription loyalty program. “Our Rx loyalty program is taking shape, and we should be in test middle to late next quarter,” Standley said.

“It’s just the start of an exciting pharmacy loyalty initiative we expect to launch later this year,” Mary Sammons, Rite Aid chairman and CEO, said.

If it’s even half as successful among Rite Aid pharmacy customers as CVS’ ExtraCare loyalty program is among its customer base, the loyalty card will drive sales across both the front-end and back bench at Rite Aid. CVS’ program boasts 56 million active cardholders, who make up 68% of that chain’s front store sales. According to Larry Merlo, CVS/pharmacy president, every penny invested results in an incremental sales lift of $1.37. ExtraCare also drives shopping frequency for CVS.

Among other initiatives, Rite Aid is making significant progress across its segmentation initiative, where stores are being divided into low-volume/high-volume or urban/suburban buckets, with labor allotments and merchandising programs catered specifically to those businesses. The chain will soon implement a new pricing model, in conjunction with that segmentation program that will increase the amount of point-of-purchase signage throughout the store around Rite Aid’s “Red Hot Specials.”

Rite Aid numbers beat projections

CAMP HILL, Pa.—What a difference three months make.

Rite Aid reported wider-than-expected losses last quarter; shares were trading at much less than $1; and the common thought then was that a reverse stock split was imminent. Worries that a tighter credit market would impact the chain’s ability to clear a significant debt hurdle only 16 months away were abundant.

Late last month, Rite Aid reported narrower-than-expected losses; shares are now valued at more than $1 and climbing, a feat the chain accomplished organically; and those shares climbed above $1 in part because the credit market has become much more favorable, enabling Rite Aid executives to close the book on refinancing that will push out that debt hurdle beyond 2013.

Rite Aid may very well have turned a corner in the past three months, traveling on a road with significantly fewer potholes. The chain expected to turn Brooks/Eckerd same-store sales positive in the near term, at least across its pharmacy base, which will mark another pretty significant turned-corner for the chain. “On the pharmacy end…I think we’re getting very close to the crossover [into positive comps] with the Brooks/Eckerd pharmacies,” John Standley, Rite Aid president and COO, acknowledged.

In addition to the refinancing, Rite Aid has completed the rollout of its metro-market model, designed to improve performance across its metropolitan footprint, and is making progress. And the chain has optimized its SKU-base by some 10%, improved generic penetration and reduced shrink.

All of this has contributed to a posted loss of $0.11 per share, $0.02 better than analysts’ projections. Total same-store sales improved by 0.6%, and the number of prescriptions climbed 2.2%.

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