The market has been chugging along nicely this year, and investors are sending signs that they believe the recovery could be gaining momentum, bidding up the S&P 500 Index
Bed Bath and Beyond
Bed Bath and Beyond
The company completed the acquisition of two businesses, Cost Plus and Linen Holdings, in the second quarter. Cost Plus is very similar in scope to the core Bed Bath and Beyond business, selling a variety of home decorating items. Linen Holdings is a bit more focused, and is mainly a business-to-business distributor of textile products.
Chief Executive Steven Temares noted in the company's conference call that these acquisitions drove down operating margins by about 2% in the second quarter, due to ongoing deleveraging in the wake of consolidating the businesses, as well as increased SG&A expenses from the acquisitions.
Admittedly, Rite Aid
Rite Aid, for its part, failed to grow same-store sales in its most recent quarter. Longer-term same-store sales growth is positive, however, fueled mainly by its loyalty rewards program and benefits from store renovations. The number of prescriptions filled at Rite Aid locations increased 4% in the last quarter, boosted by the Walgreens-Express Scripts breakup.
The real takeaway, however, was in Rite Aid's sales forecast, which was lowered to reflect continued introductions of generic drugs. The company now expects to have revenues of $25.1 billion to $25.4 billion for the year. Its prior estimate had been $25.3 billion to $25.7 billion. Investors sold off the stock on Thursday, and shares closed more than 5% lower for the day, ending at $1.27.
I'm not sure broad economic conclusions can be reached by examining the results of these two companies in isolation. At the end of the day, both had disappointing results, but they were due to mergers and acquisitions in the case of Bed Bath and Beyond, and the rise of generic drugs in the case of Rite Aid.
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