It's funny how certain events can ripple through the financial world, favoring some industries while simultaneously wreaking havoc on others. The hurricanes that battered the Southeast in September, for example, washed away profits from restaurants such as Outback
At first blush, striking grocery workers a year ago would seem to have little impact on yesterday's trading at Rite-Aid
Total revenues slipped 1.6% to $1.56 billion, with weakness in both pharmacy sales and front-end merchandise. Thus far, third-quarter sales are tracking a scant 0.2% higher, with pharmacy sales (which account for about two-thirds of total revenues) remaining essentially flat.
Aside from tough comparisons, several other factors, such as a relatively benign flu season, were cited as reasons for the disappointing results. Rite-Aid is the largest drug chain in Michigan, where the United Auto Workers have established a mandatory mail-order prescription program. Currently, the company is the only one of the big three drugstore chains without a mail-order program. Management warned that if recent weakness persists, its full-year outlook for both sales ($17 billion) and earnings ($0.16-$0.22) will not be reached.
Meanwhile, November was a little kinder to Rite-Aid's competitors. Same-store sales at CVS
Year-over-year comparisons should begin to get a little easier for Rite-Aid. The impact of the grocery strike will disappear after next quarter, and results will begin to overlap the effects of the mandatory UAW mail-order program. Nevertheless, the company continues to trail its larger rivals, with slower growth and the weakest operating margins in the group. Rite-Aid knows the symptoms, but it still hasn't effectively treated the underlying causes.
Fool contributor Nathan Slaughter owns none of the companies mentioned.