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Rite Aid sees lift in Q1, expects fiscal 2016 to be banner year

BY Michael Johnsen

CAMP HILL, Pa. — Rite Aid is expecting its EnvisionRx acquisition to increase the company's annual revenues by as much as 18.6%, from $26.3 billion in fiscal 2015 to a projected range of $30.7 billion and $31.2 billion, the company reported Thursday morning. 
 
Rite Aid expects to close its EnvisionRx deal by the end of July. That will bring the company a lot closer to its ultimate goal of evolving into a comprehensive retail healthcare company, with in-store services ranging from disease-state management and acute care coupled with the ability to manage better outcomes for payer partners on a broad scale. 
 
"EnvisionRX is a hypergrowth benefit manager that has seemingly come from nowhere to reach $5 billion in annual revenue on coverage of 13 million individual accounts," wrote Brian Nichols, Seeking Alpha analyst, in a blog post earlier this week. "While far smaller than CVS's Caremark or Express Scripts, having 13 million accounts still gives Rite Aid negotiating power with drug developers and the potential to gain new customers from EnvisionRX's account base among other benefits," he noted. "[As much as] 40% of CVS's scripts derive from Caremark," Nichols added. 
 
For fiscal 2016, Rite Aid expects drug store sales to reach between $26.9 billion and $27.4 billion and same-store sales to range from an increase of 2.5% to an increase of 4.5% over fiscal 2015. Adjusted EBITDA guidance is expected to be between $1.35 billion and $1.45 billion and net income is expected to be between $150 million and $230 million or income per diluted share of $0.14 to $0.22. 
 
"Our first-quarter results reflect the continued progress we're making in positioning Rite Aid for growth, including increases in same-store sales, same-store prescription count and Adjusted EBITDA," stated John Standley, Rite Aid chairman and CEO. "We generated these positive results while also making significant strategic investments to continue our transformation into a retail healthcare company," he said. "Through initiatives like adding RediClinics to Rite Aid stores, launching the groundbreaking wellness+ with Plenti program and our pending acquisition of EnvisionRx, we remain highly focused on delivering a differentiated experience to our customers and a higher level of care to the communities we serve."
 
Same-store sales were a primary driver behind the company's 2.8% lift in first quarter revenues to $6.6 billion, the company reported. Net income totaled $18.8 million, or $0.02 per diluted share, for the fiscal 2016 first quarter ended May 30 and adjusted EBITDA was $299.3 million, or 4.5% of revenues.
 
Same-store sales for the quarter increased 2.9% over the prior year, consisting of a 0.6% increase in front-end sales and a 3.9% increase in pharmacy sales. Pharmacy sales included an approximate 165 basis point negative impact from new generic introductions. The number of prescriptions filled in same stores increased 1.6% over the prior year period. Prescription sales accounted for 69.1% of total drug store sales, and third-party prescription revenue was 97.7% of pharmacy sales.
 
Capital expenditures are expected to be approximately $665 million.
 
In the first quarter, the company relocated two stores, remodeled 108 stores and expanded one store, bringing the total number of wellness stores chainwide to 1,741. The company also closed four stores, resulting in a total store count of 4,566 at the end of the first quarter.
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Are retailers ready for federal regulations on drones? Amazon is.

BY Mike Troy

NEW YORK — Federal regulations governing unmanned aircraft systems, or drones, will be in place by this time next year.

Most retailers won’t be ready, but Amazon says it will be as soon as the feds are. Testifying at a congressional hearing on June 17, Paul Misener, Amazon.com’s VP of global public policy told lawmakers it would be ready to deliver packages via its service branded as Prime Air as soon as federal rules are in place.

"We'd like to begin delivering to our customers as soon as it's approved," Misener said during the meeting. "We will have (the technology) in place by the time any regulations are ready. We are working very quickly."

At hearings held earlier this year Misener chastised regulators for not moving more quickly to implement regulations concerning the use of unmanned aircraft for commercial deliveries. Amazon also previously indicated its Prime Air service will allow for delivery of packages within 30 minutes.

Regulations proposed by the Federal Aviation Administration back in February were very restrictive, allowed drones to be flown only during daylight hours and by operators who maintained a line of site with the vehicle.

Obviously, such a scenario would be problematic for Amazon.com or other retailers contemplating the use of unmanned aircraft, so the FAA has gone back to the drawing board to craft rules that it is presumed will allow for vehicles to fly autonomously over greater distances.

“The rule will be in place within the year,” said FAA deputy administrator Michael Whitaker at the hearing held by the House Oversight Committee.

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Is A&P supermarket chain poised for sale?

BY DSN STAFF

MONTVALE, N.J. — The Great Atlantic & Pacific Tea Co. is actively shopping 137 of its stores, including 10 Food Emporium locations in New York City, according to the New York Post.

A&P, which emerged from bankruptcy protection in 2012, told The Record newspaper on June 16 that the company continues to weigh its options and that it is exploring strategic alternatives.

Read more by clicking here.

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