Rite Aid in the Shadows

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Rite Aid (NYSE: RAD) reported some healthy earnings yesterday, showing a profit in the company's fiscal first quarter as opposed to a rather sickly loss one year ago.

The pharmacy posted $63.3 million in net income vs. a net loss of $38.8 million in 2003's first quarter. Net sales increased 4.9% to $4.2 billion, with same-store sales expanding by 5.3%. The comparison to last year's quarter is quite favorable due to an absence of charges stemming from debt management (which was valued at $33.4 million) and store closings (last year's quarter saw a charge of $6.4 million, and this year saw an impairment credit of $4.6 million).

All doctors should be honest with their patients, and I shall be no different (I'm not a doctor, but I play one on the Fool, of course). This earnings report is not in the same league as Walgreen's (NYSE: WAG). Looking at Seth Jayson's article on that company's quarter shows double-digit increases across the board for earnings, comps, and revenues. We don't see that with Rite Aid. Mike Cianciolo examinedCVS (NYSE: CVS) and its nearly 25% growth in earnings last month; once again, Rite Aid can't compare.

I don't currently own any of the drug retailers, but if I were to prescribe myself something in this area, I'd probably go for one of the other two. To begin with, Walgreen's and CVS both possess a dividend yield (slight ones to be sure, but a payout is a payout). And while Rite Aid might make for an interesting speculative bet at currently less than $6 a share, low-priced stocks carry their own unique risks.

Rite Aid is certainly looking more profitable, as evidenced by yesterday's release and its previous quarter. Also, the company presented improved guidance for fiscal 2005. But I just don't see any compelling reason for an individual investor like myself to use this stock as a long-term investment vehicle. If you're on the lookout for a panacea for an ailing portfolio, this probably isn't it, especially considering the more dominant position CVS will have once it formally acquires the Eckerd chain from seller J.C. Penney (NYSE: JCP).

Fool contributor Steven Mallas owns no shares in any of the companies mentioned in this piece.