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A&P refinances credit facilities, looks to ‘accelerate growth strategies’

BY Antoinette Alexander

MONTVALE, N.J. — A&P has completed the refinancing of its existing senior debt, which it says will enable the company to further invest in the business and ramp up growth strategies.

A&P has partnered with Wells Fargo Capital Finance to arrange the new $300 million senior secured ABL facility and $270 million senior secured term loan through an amendment and restatement of its existing credit agreements.

According to A&P, its enhanced capital structure is the latest indication of the company’s improved business fundamentals, and follows the upgraded ratings outlooks issued by each of Moody’s and Standard & Poor’s earlier this year. The new covenant-free debt arrangement provides for a significant reduction in interest expense and enhanced liquidity.

“We are extremely pleased to have completed the refinancing of our credit facilities on attractive terms that reduce our borrowing costs and provide greater operational and financial flexibility. Our new senior debt puts the company in a much stronger financial position and allows us to focus on investing in our business by supporting and accelerating our growth strategies,” stated Paul Hertz, president and CEO.
 

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Superior front-end experience, improved patient outcomes will define Rite Aid’s success

BY Michael Johnsen

 

Revising year-end guidance on account of reimbursement rate headwinds, Rite Aid's stock took a hit after reporting second-quarter earnings, even though the company beat analysts' consensus estimates for the quarter. The retail pharmacy operation recorded second-quarter profit of $127.8 million, or 13 cents per share, more than doubling the FactSet consensus analyst estimate of 6 cents a share, according to a MarketWatch report. And while revenue of $6.5 billion was in line with analyst expectations, Rite Aid topped expected same-store sales growth of 3.3% by recording 4.1% in same-store sales growth. 
 
Rite Aid is still on the right track. 
 
Rite Aid's Wellness store format has reached the 1,433 store mark, comprising 31% of the chain. It's a significant front-end same-store sales booster. "For the second quarter, front-end, same-store sales in our Wellness stores were approximately 250 basis points higher than our non-Wellness stores, and script growth was 85 basis points higher," reported Darren Karst, Rite Aid EVP and CFO, during the second quarter conference call. 
 
"Our Wellness store program is perhaps the most visible component of our ongoing transformation and these stores continued to deliver strong results in the second quarter, once again outperforming the rest of the chain in terms of same-store front-end sales and script count," Ken Martindale, Rite Aid president and COO, told analysts during the second-quarter conference call. "We remain highly focused on leveraging our Wellness store program to launch innovative merchandising concepts that significantly enhance the shopping experience," he said. "A great example is our new OTC presentation. This unique research-based consumer solution was developed and tested in conjunction with several key suppliers during the past year. The new design makes shopping navigation much easier and incorporates consumer education and product cross-selling to deliver a much better customer experience."
 
That's one of the chief reasons Rite Aid's Wellness store format works — it is predicated on the consumer experience. "As we continue to spend more time with the customers and our associates, listening to the needs that our customers have, we are continuing to evolve [the Wellness store format]," Martindale told DSN in an exclusive store tour of their new Beverly Hills, Calif. location opened earlier this summer. Rite Aid's Wellness format features Wellness Ambassadors in the OTC aisles and beauty advisors in the beauty department. And Rite Aid is piloting its Fresh Day Cafe offering at that particular location, extending its consumer experience to gourmet coffees and Thrifty White ice cream.  
 
Differentiating the in-store experience will be the key to front-end success going forward. That is fast becoming the reality of brick-and-mortar retailing. "There are experiences within traditional retail that are going to have to be different," commented Brett Goffin, industry head of retail at Google, during an exclusive one-day summit co-hosted by Mack Elevation Forum and Drug Store News. "The value proposition to the end user has to bear out, so you have to ask what is the value proposition of the customer coming into the store?" he asked. "If it’s just, you have a wide selection. That’s somewhat of a challenge because the wider selection is actually somewhere else. But if it’s we have category expertise … people aren’t necessarily experts, they do need category expertise, they do need positive great experiences, something that you can’t get [online]."
 
And that is what Rite Aid is delivering with its Wellness format. It's not just a streamlined, more natural look and feel that the format conveys to the consumer, it's the expertise in the beauty department, in the OTC aisle and behind the pharmacy bench that the consumer can take advantage of. And it's the fun experiences to be had with initiatives like Fresh Day Cafe. 
 
Beyond Rite Aid's Wellness store format, Rite Aid has a new offering that will help drive foot traffic and generate another revenue stream in its own right that hasn't really been put into play yet but will be very soon: the Rite Aid Rediclinic.

"We're tracking right on target and we are going to start opening them in several months. So you are going to see them aggressively rolling out and we are very excited about the opportunity that lies ahead of us here," Martindale told analysts during that second-quarter conference call. That additional foot traffic not only gives Rite Aid the opportunity to showcase their superior front-end offering, but also generates incremental prescription business. 

 
And Rite Aid's Rediclinic offering will only augment Rite Aid's Health Alliance proposition. The Rite Aid Health Alliance employs a team approach with pharmacists, physicians and specially-trained in-store health coaches — all endeavoring to help patients with polychronic and chronic conditions meet certain health-related goals central to improving outcomes. Rite Aid most recently signed a sixth partnership under its Health Alliance umbrella with Physician Direct ACO of Detroit. 
 
The combination of Rite Aid's Rediclinics and Health Alliance partnerships positions Rite Aid well in improving health outcomes. And improving health outcomes will be the name of the pharmacy game going forward. "At the end of the day we do bring value to the equation in terms of what we do," John Standley, Rite Aid chairman and CEO, told analysts. "We are increasing that value every day with the various initiatives that we are working on in terms of things we're doing for chronic care and polychronic care," he said. "Ultimately, I think the marketplace will recognize us for the value that we bring in patient care. That's not something that's going to happen overnight [but] from a strategic perspective over time, that's where the real value in this relationship [with PBMs] is created."
 
Rite Aid is still on the right track toward future success. The Pennsylvania chain is leading with a strong front-end engine defined by a superior consumer experience and bringing up the rear with a pharmacy/retail clinic operation that will measure its success in improved patient outcomes. 

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New Neighbourhood Pharmacy Association of Canada created to serve as strong voice for industry

BY Antoinette Alexander

TORONTO — Looking to serve a strong voice and advocate for Canada’s neighborhood pharmacy as they play an increasingly important role in healthcare is the new Neighbourhood Pharmacy Association of Canada.

The association represents the operators of Canada’s approximately 6,500 chain, banner and franchise neighborhood pharmacies, as well as grocery chains and mass merchandisers with pharmacies.
 
“Neighbourhood pharmacy is an essential and increasingly important healthcare service provider, that is enhancing patient outcomes, reducing overall healthcare costs and improving access to care by delivering services closer to where Canadians live, work and play,” stated Neighbourhood Pharmacy’s board chair Frank Scorpiniti, CEO of Rexall.
 
The organization draws strength from Canadians’ strong and increasingly positive view of neighborhood pharmacies. According to a recent national survey, overall favorability has increased to 76.1%, from 68.9% in 2013. Canadians also see pharmacies as being friendly (90.5% agree or somewhat agree) and providing advice that is accessible (89.5%) and affordable (84.2%) — and more Canadians attribute all three of these characteristics to pharmacies in 2014 than in 2013.

Furthermore, neighborhood pharmacy helps save the Canadian healthcare system more than $12.5 billion annually, according to the association, preventing adverse drug reactions, operating an efficient supply chain and by providing innovative drug therapies and lower-cost generic drugs.
 
“Neighbourhood Pharmacy exists to help connect our members with governments and others in healthcare to identify, research and develop proposals that deliver tangible health and economic benefits for Canadians,” stated Denise Carpenter, president and CEO of the association. “Our healthcare delivery system faces significant challenges from rising costs and an aging population. Access to healthcare, closer to home, plays a significant role in driving better patient outcomes and reducing overall healthcare costs.”
 
Neighborhood pharmacies employ approximately 500,000 Canadians in settings ranging from independent retailers to larger chain pharmacies. In 2013, the broader pharmacy industry unveiled “9000 Points of Care,” a policy platform to improve access to affordable healthcare.
 
“Our public policy platform, “9000 Points of Care,” identifies strategies to make better use of the broader pharmacy community’s capabilities. We are poised to work with governments and others in the healthcare community to demonstrate the efficacy of these strategies so that they can be implemented around the country,” added Carpenter.   

In addition to Scorpiniti and Carpenter, Vivek Sood, GM of Sobeys Pharmacy Group, serves as board vice chair. Additional board members include Dorian Lo, EVP pharmacy and healthcare at Shoppers Drug Mart/Pharmaprix; Genevieve Fortier, SVP human resources, government affairs, corporate communications at McKesson Canada; Charles Milliard, EVP of Uniprix; Eric Muir, SVP, health and wellness at Walmart Canada; John Tse, VP, pharmacy and cosmetics at London Drugs; and Rita Winn, GM and COO at Lovell Drugs.

 
 
 
 
 

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