Despite setbacks, the future of Rite Aid looks positive
NEW YORK Judging from Rite Aid’s annual shareholder meeting held here Thursday morning, there’s more going right at Rite Aid these days than there is going wrong.
Rite Aid executives laid out a roadmap for investors as to how the chain has already improved operations and sales in the second half of fiscal year 2009, as well as how the chain will continue to improve in fiscal 2010.
“Rite Aid is in a much stronger financial position than it was just a few months ago,” said Mary Sammons, Rite Aid chairman and CEO.
For example, it’s by no means a lock, but in just four trading days Rite Aid’s stock will have traded above $1 long enough that it will have satisfied the requirements to stay listed on the New York Stock Exchange, Sammons told shareholders at the chain’s annual meeting Thursday morning.
And that’s certainly a marked improvement as Rite Aid never had to resort to the reverse stock split shareholders approved last December.
And within the past year, Rite Aid successfully recruited proven turnaround executives in John Standley, now president and COO, along with Frank Vitrano as CFO and chief administrative officer and Ken Martindale senior EVP merchandising. And in only three quarters, the impact of those recruitments has been felt:
- Pharmacy sales are trending positive and the chain is gaining market share in this tough economy as evidenced by its 2.2% increase in overall script count (“A pretty significant turnaround for us,” Standley said);
- The trend of a quarter-by-quarter increasing SG&A as a percent of sales was reversed, falling below the prior-year percentage by the fourth quarter of fiscal 2009. Similarly, distribution costs as a percentage of sales had dropped significantly by the fourth quarter of the chain’s last fiscal year. Customer satisfaction ratings are actually above historical levels — a 74% approval rating through fiscal 2009, as compared with the pre-Brooks/Eckerd acquisition approval rating of 67% recorded in fiscal 2005;
- The chain also appears likely to successfully renegotiate a September 2010 debt hurdle in the coming months, ahead of schedule. The renegotiated debt, which pushes the majority of that debt out some three years, gives the chain an opportunity to capitalize on its growing prescription base when the economy begins turning around.
And looking forward, Rite Aid has a number initiatives expected to further improve operational efficiency and increase sales. The chain is making significant progress across its segmentation initiative, where stores are being divided into low-volume/high-volume or urban/suburban buckets with labor allotments and merchandising programs catered specifically to those businesses.
The chain will soon implement a new pricing model, in conjunction with that segmentation program, that will increase the amount of point-of-purchase signage throughout the store around Rite Aid’s “Red Hot Specials.”
Standley also noted that Rite Aid’s Rx Savings Card now boasts approximately 2.6 million members. Rite Aid is currently developing a pharmacy loyalty program that will be rolled out in the second-half of fiscal 2010, he added.
Walgreens opens eco-friendly drug store
DEERFIELD, Ill. The “green” in the Walgreens name is taking on new meaning.
Walgreens Wednesday unveiled what it calls the nation’s first drug store to meet top environmental requirements for efficiency and design. The new store, in the San Diego suburb of Mira Mesa, Calif., is designed to meet Leadership in Energy and Environmental Design standards, a certification granted by the U.S. Green Building Council.
Walgreens officials and guests marked the store’s grand opening with a tree planting ceremony and other eco-oriented activities, along with product giveaways for the local community. The company also is donating $5,000 to the San Diego chapter of the Surfrider Foundation, a nonprofit environmental group whose goal is to protect the world’s oceans, waves and beaches through education, conservation and research.
“We are proud to showcase our commitment to the environment here in the San Diego area, a region recognized for its sustainability efforts,” said Walgreens operations VP Matt Sesto. “Walgreens is making great progress on our environmental initiatives in stores chainwide. We’re cutting our electricity and water usage, recycling tons of cardboard and shrink wrap each year and upgrading equipment for maximum efficiency.”
The Mira Mesa store — Walgreens’ first in that community and its 19th unit in San Diego County — offers reserved parking for hybrid vehicles and bike racks, and is located close to public transportation. Seventy-five percent of the store’s lighting comes from sunlight through skylights and solar tubes. Coolers, freezers and exterior signs all use LED lights, reducing energy use by 50% over fluorescent lighting.
The store will save enough electricity to power 19.3 homes per year, according to Walgreens. In addition, the use of native and adaptive plant species will eliminate water usage for landscaping, and 95% of construction waste was diverted from landfills and recycled.
“Signage posted inside the store will inform customers about the features that make this location unique,” Sesto said. “We want people to feel good about shopping here, and maybe even be inspired to live greener lives.”
The Mira Mesa Walgreens is registered under the LEED Green Building Rating System. It will be reviewed by the USGBC and given a specific level of certification in four to six months.
Walgreens plans to open its next LEED-registered store in Chicago this fall, with two more locations to follow by the end of the year. The company’s efforts to reduce its carbon footprint also include the use of solar panel systems in 63 of its locations in California, Connecticut, New Jersey and Oregon.
The chain opened its first store in Southern California more than 15 years ago. Another nine Walgreens stores are planned to open in the area by the end of 2011.
Supervalu CEO warns investors of upcoming Q1 results
MINNEAPOLIS Within one week after the close of its first quarter ended, June 20, Supervalu officials warned investors that results will be “substantially” less than originally anticipated.
“Since providing guidance on our fourth-quarter earnings call, consumers have become more value focused and cautious in their spending, which has pressured sales and margins greater than anticipated,” said Supervalu CEO Craig Herkert. “We currently estimate our identical-store sales will be approximately negative 3%. We will update annual guidance on July 28 with our first-quarter earnings release,” he said. “I am engaged in a full review of our operations and support functions. Supervalu has significant potential.”