For the third quarter of fiscal 2007, Rite Aid
The company operates more than 3,300 drugstores, and it's in the process of acquiring 1,850 Brooks and Eckerd drugstores from The Jean Coutu Group. Rite Aid increased total sales 4.2%, while same-store sales rose 3.4%, on a mix of a 4.3% increase from pharmacy sales (which account for 64.3% of total sales) and a 1.9% increase in front-end (or non-prescription) products. Operating margin increased 24 basis points, as improved labor cost controls offset a decrease in gross margin caused by items such as promotional pricing.
In the conference call, management noted that it believes its customers have not and will not defect to Wal-Mart's
In terms of its own acquisition of the Brooks and Eckerd drugstores, management believes its integration plans are on track. Shareholders will vote on the merger on January 18, 2007, and the company expects to receive shareholder, as well as regulatory approval. Rite Aid has two much larger and extremely well-run competitors in CVS and Walgreen
All in all, although the results weren't a blowout, the quarter seemed pretty decent. Given past problems and the company's heavy debt load, small improvements are extremely welcome.
For more on these pharmacies, check out:
- Rite Aid: Comps Mean Competition
- CVS/Caremark: A Brobdingnagian Drug Seller
- Jaw-Dropping Pill-Popping at Walgreen
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Fool contributor Emil Lee is an analyst and a disciple of value investing. He doesn't own shares in any of the companies mentioned above. Emil appreciates comments, concerns, and complaints. The Motley Fool has a disclosure policy.