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Rite Aid continues evolving Wellness store format

More than 1-in-4 Rite Aid locations now reflect the latest in healthcare retailing — the company's Wellness store format, the concept that serves as a cornerstone to Rite Aid's overall health-and-wellness solution, John Standley, Rite Aid chairman and CEO, told analysts Thursday morning.

"From a strategic standpoint, it's important to note that our Wellness stores will serve as a primary vehicle for launching innovative merchandising solutions, expanded healthcare offerings and, over the next few years, our relocation and new store program," he said.

Later Thursday morning, during the chain's annual shareholder meeting, shareholders elected eight directors to hold office until the 2015 Annual Meeting of Stockholders, including John Standley, Rite Aid chairman and CEO, and directors Joseph Anderson Jr., Bruce Bodaken, David Jessick, Kevin Lofton, Myrtle Potter, Michael Regan and Marcy Syms. Rite Aid shareholders also ratified the appointment of Deloitte & Touche as the company's independent registered public accounting firm, approved the compensation packages of Rite Aid's executive officers and approved the adoption of the Rite Aid Corporation 2014 Omnibus Equity Incentive Plan.

Rite Aid stock holders overwhelmingly voted down a shareholder proposal to split the chairman and CEO positions at Rite Aid.

As will be heralded next week with the unveiling of Rite Aid's Beverly Hills Wellness Store, the evolving healthcare solution concept store features an augmented over-the-counter offering, coupled with a stylish beauty offering. "[This store] illustrates how we're aggressively evolving the format to identify additional features that can be broadly applied to future remodels and other features that can be implemented in select stores with specific growth opportunities," Standley said. "Wellness Stores will also serve as the foundation for expanding our healthcare offering, including our Rite Aid Health Alliance program for patients with chronic and poly-chronic conditions, as well as adding RediClinics to Rite Aid stores."

Rite Aid is targeting 70 RediClinic openings over the ensuing 18 months, and Rite Aid most recently partnered with Penn State Hershey Health System through its Health Alliance initiative, which is now active in four markets. "We [will] continue to focus on forming partnerships with additional medical practices as we look to provide a higher level of care," Standley said.

"[Rite Aid Wellness Stores] continue to outperform the rest of the chain in terms of same-store front-end sales and script count," said Ken Martindale, Rite Aid president and COO. "[The Beverly Hills location] includes concepts that have done well in pilot and will be broadly applied to future Wellness Stores, like our enhanced OTC presentation that features educational materials, interactive product displays and creative fixturing," he said. "The store also features concepts that we're just beginning to test, such as our Fresh Day Cafe that serves coffee, pastries, breakfast sandwiches and Rite Aid's very own Thrifty ice cream," Martindale said. "Finally, this store includes an expanded and enhanced beauty department staffed by a terrific beauty advisor."

While most of Rite Aid's new merchandising concepts will be incorporated into future Wellness store remodels, such particularly compelling features as Rite Aid's nail bar concept will be folded into existing Wellness stores as well, Martindale said.

Overall, Rite Aid is looking to align its front-end with its healthcare solutions portfolio. "We are currently working to further strengthen our smoking cessation program by developing a best-in-class consumer solution," Martindale said. "We have also launched a nutritional labeling system to help shoppers easily find food items that are a better fit for their wellness needs."

Rite Aid also is benefitting from the momentum of its loyalty card program — Rite Aid's Wellness65+ membership roll now is approaching 2 million, Martindale said. The broader Wellness+ loyalty program continues to perform as well, as customers respond positively to "the program's unique combination of exclusive savings and wellness benefits."

Rite Aid on Thursday reported a 2.7% lift in revenues to $6.5 billion for its fiscal first quarter ended May 31. Net income totaled $41.4 million or $0.04 per diluted share, and adjusted EBITDA reached $282.6 million, or 4.4% of revenues.

Same-store sales for the quarter increased 3.1% over the prior year. Front-end same-store sales were flat compared to the prior-year period while pharmacy same-store sales increased 4.6%. Pharmacy sales included an approximate 143 basis point negative impact from new generic introductions. The number of prescriptions filled in same stores increased 2.3% over the prior year period. Prescription sales accounted for 68.4% of total drug store sales, and third party prescription revenue was 97.4% of pharmacy sales.  

In the first quarter, the company relocated three stores, remodeled 105 stores and expanded one store, bringing the total number of wellness stores chainwide to 1,325. The company also acquired one store and closed seven stores, resulting in a total store count of 4,581 at the end of the first quarter.

Rite Aid also confirmed its fiscal 2015 guidance, which was updated on June 5, 2014. Sales are expected to be between $26 billion and $26.5 billion and same-store sales to range from an increase of 2.5% to an increase of 4.5% over fiscal 2014.

Capital expenditures are expected to be approximately $525 million, which will fund one new store, 19 store relocations and 450 Wellness Store remodels.

 

 

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