Rite Aid boosts sales with Brooks/Eckerd

CAMP HILL, Pa. —A full four quarters of Brooks/Eckerd sales results helped boost Rite Aid revenues by 8.1% to $26.3 billion for its fiscal year 2009 ended Feb. 28, Rite Aid reported earlier this month.

“Despite continued weakness in the economy, we were able to improve our business significantly in the second half of the year as we completed the integration of Brooks/Eckerd, enhanced our management team and focused on strengthening our financial position,” stated Mary Sammons, Rite Aid chairman and CEO.”

Rite Aid currently is in the process of identifying two classes of stores within its overall base—low-volume stores and metropolitan markets—and implementing initiatives specific to those classes in an effort to improve efficiencies. “Rite Aid has already taken steps with 440…low-volume stores to make fewer deliveries each week, shrink the weekly circular and the amount of promotional inventory sent to the stores, and fine-tune store labor and field supervision,” noted Meredith Adler, Barclays Capital analyst. “We really saw the sales in those stores actually perform as well as the overall chain,” John Standley, Rite Aid president and COO, noted.

Rite Aid took a similar approach to its Philadelphia stores, which generally have higher sales of fast-turning consumables and lower sales of discretionary seasonal goods. Rite Aid plans to expand its learnings from Philadelphia to other markets this year. The company also mentioned launching a new prescription loyalty program in the second half of 2010, though declined to provide greater detail.

Beyond the “Philadelphia Experiment,” the company continues to explore opportunities to trim fat. Last year, Rite Aid shut 200 underperforming stores, and it expects to shut 117 more this year.

“[Rite Aid] is aggressively cutting field and store-level labor, advertising expenses, inventory and capital expenditures,” noted Credit Suisse research analyst Edward Kelly. “While the company’s plan of action makes sense, the impact on sales may be larger than the company expects, and we believe it will ultimately look to sell assets [such as its West Coast or Southeast stores] to negotiate its September 2010 revolver maturity.”