Back in the early '90s, when I lived in an adorable little neighborhood on Manhattan's Upper West Side, I could see that selling drugs was a darn good business. I'm not talking about the illegal, illicit stuff -- I'm talking about the streets of New York, which were populated by more drugstores than rats.
A quick check shows that there are no less than six Rite Aid
For the fourth quarter, revenues were up 6.2% to $4.4 billion, and earnings of $0.09 per share look a lot better than the $0.02 loss in the prior-year period. The numbers were similar for the year as a whole: Sales up 5.1% to $16.6 billion, and earnings at $0.11 per stub versus a $0.28 loss the previous year.
What's the secret of that success? Good old-fashioned comps growth -- 6.4% for the quarter and 5.7% for the year -- plus, much lower expenses for shuttering non-performing locations. Apparently, Rite Aid sees no crime in being small, which is a good thing considering that rival CVS
Rite Aid looks like it's recovered from some pretty groggy times, but it's got $3.4 billion in debt on the books, which chews up more than $300 million a year in interest. And investors will want to keep an eye on the expense for stock-based compensation. At $30 million, it grew six times over the prior year.
Guidance for around $135 million in net income for the coming year would represent 63% growth over the latest year's figures, and might help soothe investors spooked by the price-to-earnings ratio of 55 at today's $5.55 per share. It might even look downright cheap compared to Walgreen, which is valued at a P/E of 25 yet is growing earnings at a tamer 15%.
Discuss the drugstore world's big fish in the Fool's Walgreen discussion board.
Fool contributor Seth Jayson owns no stake in any firm mentioned above. View his Fool profile here.
