Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



Rite Aid Corporation Earnings: Is Recent Growth Sustainable?

On Thursday, Rite Aid (NYSE: RAD  ) will release its quarterly report. Shareholders remain encouraged by the huge gains the stock has made over the past year. Despite skepticism among those who believed that the drugstore chain could never compete effectively against Walgreen (NASDAQ: WBA  ) and CVS Caremark (NYSE: CVS  ) , Rite Aid has made substantial progress in making itself a viable long-term player in the industry.

For years, many investors believed that Rite Aid wouldn't be able to survive, with substantial amounts of debt and a smaller network of stores than CVS Caremark or Walgreen. But the underdog drugstore chain has aggressively moved forward with efforts to boost its margins and improve its image, and profitable results for two straight years have defied naysayers and convinced many that Rite Aid's turnaround story is real. Let's take an early look at what's been happening with Rite Aid over the past quarter and what we're likely to see in its report.

Stats on Rite Aid

Analyst EPS Estimate


Change From Year-Ago EPS


Revenue Estimate

$6.43 billion

Change From Year-Ago Revenue


Earnings Beats in Past 4 Quarters


Source: Yahoo! Finance.

How far can Rite Aid earnings climb?
In recent months investors have had mixed views on Rite Aid earnings, cutting their May-quarter estimates by $0.03 per share but boosting their fiscal 2016 projections by about 4%. The stock has reflected overall enthusiasm for the company, though, gaining another 7% since mid-March.

Rite Aid's fiscal fourth-quarter results in April showed investors just how far the company has come. Profits were much higher than expected, with same-store sales gains of 2.1% resulting from a 3.5% boost in pharmacy comps. In addition, projections for the full fiscal year look promising, with comps expected to rise between 2.5% and 4.5% and large gains seen for adjusted operating earnings as well.

Source: Rite Aid.

Yet just earlier this month, Rite Aid gave investors pause about how much further it could climb. The company said May same-store sales rose 3.5%, but it cut its profit expectations because of higher drug costs. Even though the reduction in full-year guidance was just $0.01 to $0.02 per share, Rite Aid stock plunged in response as some momentum investors saw a chance that the good times were coming to an end.

Still, Rite Aid's recovery has been impressive because of the scope of improvements the company has made. Even as Walgreen has managed to win some of its customers back from Rite Aid after a pharmacy-benefit dispute forced many Walgreen customers to defect to Rite Aid and CVS, Rite Aid has benefited greatly from the rise of generic drugs and the higher margins they give its pharmacy business. With a recent deal to get all of its generic drugs from a single source, Rite Aid should see even greater efficiency improvements, with less need to stock substantial drug inventories, freeing up working capital for other uses.

Now, Rite Aid is moving toward fostering its own growth. In April, Rite Aid announced it would purchase Texas-area clinic operator RediClinic, furthering the drugstore chain's efforts to broaden its mission to incorporate more aspects of health care and answering similar moves from Walgreen and CVS Caremark on the clinic front. In addition, store remodeling efforts to recast its drugstores as wellness-oriented stores has allowed Rite Aid to expand into other product lines, ranging from fitness apparel and equipment to specialized nutritional products and foods. Rite Aid's loyalty program has also been a source of growth, with much better rewards than CVS and Walgreen offer, helping to encourage long-term patronage among customers.

In the Rite Aid earnings report, watch to see how well the company is doing at making its store-format transition and taking advantage of the opportunities in its clinic business. With strong competition from CVS Caremark and Walgreen and so much up in the air on the health-care front, Rite Aid has a chance to set trends that could take it forward for years into the future.

Leaked: This coming blockbuster will make every biotech jealous
The best biotech investors consistently reap gigantic profits by recognizing true potential earlier and more accurately than anyone else. Let me cut right to the chase. There is a product in development that will revolutionize not how we treat a common chronic illness, but potentially the entire health industry. Analysts are already licking their chops at the sales potential. In order to outsmart Wall Street and realize multi-bagger returns you will need The Motley Fool's new free report on the dream-team responsible for this game-changing blockbuster. CLICK HERE NOW.

Click here to add Rite Aid to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.

Read/Post Comments (0) | Recommend This Article (4)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2999700, ~/Articles/ArticleHandler.aspx, 8/31/2015 6:56:36 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Dan Caplinger

Dan Caplinger has been a contract writer for the Motley Fool since 2006. As the Fool's Director of Investment Planning, Dan oversees much of the personal-finance and investment-planning content published daily on With a background as an estate-planning attorney and independent financial consultant, Dan's articles are based on more than 20 years of experience from all angles of the financial world.

Today's Market

updated 2 days ago Sponsored by:
DOW 16,643.01 -11.76 -0.07%
S&P 500 1,988.87 1.21 0.06%
NASD 4,828.33 15.62 0.32%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

8/28/2015 4:01 PM
CVS $104.18 Down -1.02 -0.97%
CVS Health CAPS Rating: ****
RAD $8.24 Down +0.00 +0.00%
Rite Aid Corp CAPS Rating: ***
WBA $87.42 Down -0.43 -0.49%
Walgreen Boots All… CAPS Rating: ****