What's Wrong at Rite-Aid?

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 (NYSE:OSI) and grounded revenues at Jet Blue Airways (NASDAQ:JBLU). Yet all the debris was a boon to Waste Management (NYSE:WMI) -- the trash hauler who collected millions to take it away.

At first blush, striking grocery workers a year ago would seem to have little impact on yesterday's trading at Rite-Aid (NYSE:RAD). Last year, though, when the Southern California labor dispute kept droves of customers away from stores owned by Kroger (NYSE:KR) and others, more than a few decided to visit Rite-Aid instead. Unfortunately, that unexpected surge of business made this November's sales results look weak by comparison, and reports of a 1.3% drop in monthly same-store sales helped drive shares of the nation's No. 3 drugstore chain 10% lower for the day.

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 (NYSE:CVS) rose 3.1%, with pharmacy and merchandise comps up 4% and 1.2% respectively. With the inclusion of nearly 1,300 Eckerd stores, total revenues swelled 27% to $2.07 billion. Industry leader Walgreen (NYSE:WAG) is flexing its muscles, with increases of 5.7% in merchandise and 15% in pharmacy driving overall same-store sales 11.4% higher. Total sales for the month jumped 15.2% to $3.37 billion.

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.