Key Rite Aid revenue metric slides in September
CAMP HILL, Pa. -- Rite Aid Corp.'s revenue from established locations slid less than 1 percent last month, as the introduction of cheaper generic drugs helped knock down pharmacy sales for the nation's third largest drugstore chain.
The Camp Hill, Pa., company said Thursday that pharmacy sales at stores open at least a year fell 2.3 percent while prescriptions grew 4.4 percent.
Rite Aid, Walgreen Co. and other drugstore operators have seen their pharmacy revenue fall this year due to the introduction of generic equivalents to popular brand-name drugs like the cholesterol fighter Lipitor. The generics hurt revenue because they cost less than brand-name alternatives.
But they help drugstore earnings because they offer a wider margin between the cost for the pharmacy to purchase the drugs and the reimbursement it receives. Walgreen said Wednesday generic drug introductions accounted for more than half of the 16.1 percent drop it saw in pharmacy revenue last month.
Rite Aid said in a brief statement Thursday that sales from the "front end" or rest of the store at locations open at least a year increased 2.8 percent in September. Revenue from stores open at least a year is considered a key indicator of retailer health because it leaves out results from locations that have opened or closed in the last year.
Bad weather that kept customers away from stores, a slow start to the cold, cough and flu season, and weaker sales for allergy-related treatments in September 2011 all made "front-end" sales comparisons easier for drugstores this year, Credit Suisse analyst Edward J. Kelly said in a recent research note.
Total sales for the four weeks that ended Sept. 29 fell 1.5 percent to $1.9 billion compared to September 2011. Prescriptions made up about 68 percent of drugstore sales.
Rite Aid has closed 55 stores over the past year and had 4,639 as of Sept. 29. Walgreen and CVS Caremark Corp. both have more than 7,000 locations.
Rite Aid shares were unchanged at $1.16 in morning trading.