Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of drug store chain Rite Aid (NYSE: RAD ) soared more than 14% this morning after its quarterly results and outlook topped Wall Street expectations.
So what: The stock has soared in 2013 on an impressive string of profitable quarters, and today's second-quarter results -- income of $32.8 million versus a loss of $38.8 million -- coupled with upbeat full-year guidance only reinforces that operating momentum. While both revenue and same-store sales only increased about 1%, strong demand for higher-margin generic drugs continued to boost profitability.
Now what: Management now sees full-year EPS of $0.18 to $0.27 on revenue of $25.1 billion to $25.3 billion, up from its prior view of $0.04 to $0.19 and $24.9 billion to $25.3 billion. "As we continue to improve our operational and financial performance," CEO John Standley said in a statement, "we are also making tremendous progress in transforming our more than 4,600 stores into true neighborhood destinations for health and wellness, as indicated by our successful launch of the wellness65+ loyalty program for seniors, a strong start to our flu immunization campaign and the completion of our 1,000th wellness store remodel." Of course, when you couple Rite Aid's still-hefty debt load with its red-hot stock price -- now up a whopping 230% over the past year -- I'd wait for more of the risks to be discounted before jumping in.
More prudent ways to play retail
The retail space is in the midst of the biggest paradigm shift since mail order took off at the turn of last century. Only those most forward-looking and capable companies will survive, and they'll handsomely reward those investors who understand the landscape. You can read about the 3 Companies Ready to Rule Retail in The Motley Fool's special report. Uncovering these top picks is free today; just click here to read more.