Wellness+ will position Rite Aid to grow
WHAT IT MEANS AND WHY IT’S IMPORTANT — Rite Aid’s launch of Wellness+ for Diabetes comes at a time when it looks like the 4,694-store retail pharmacy chain’s fortunes are picking up in a big way.
(THE NEWS: Rite Aid launches Wellness+ for Diabetes. For the full story, click here)
Tucked inside the company’s second quarter 2012 earnings call on Sept. 22, when president and CEO John Standley first mentioned the Wellness+ program extension, was a remark by CFO, chief administrative officer and senior EVP Frank Vitrano, that the quarter’s $6.3 billion in revenues marked the first increase in total sales in 13 quarters, due to higher comps and fewer store closings.
From Wellness+ to Wellness+ for Diabetes, from Wellness stores to virtual clinics, the story of Rite Aid has a new author, and it shows in the company’s results. A year ago, Wellness+ Gold members had basket rings 78% higher than nonmembers; today, that number is 128%. Meanwhile, sales at Wellness stores have trended ahead of the chain’s core stores.
Wall Street has taken note as well.
Analyst John Heinbockel of Guggenheim Partners said that the increase in Wellness+ members to 44 million and the completion of 40 Wellness store remodels — which he estimated to provide a comp lift of 7% to 10% — combined with other factors would drive EBITDA for 2012 to $950 million, “even if the economy remains soft.” EBIDTA in fiscal year 2011 was $859 million.
While saying that momentum was “slowly, but surely, continuing to build,” analysts at Goldman Sachs noted that Wellness+ had been successful in retaining customers, but suggested that it be used to draw new customers as well. “We remain cautiously optimistic that RAD’s ability to draw customers to its stores instead of its competitor’s stores will drive sales growth in the coming year,” the report read, noting that possible competitive responses to Wellness+ could present a risk.
Still, with the boost in membership and the launch of Wellness+ for Diabetes — allowing the chain to tap directly into a 26 million-strong market — Wellness+ is one of the growing number of ways that Rite Aid is positioning itself for growth and opportunities now and in the years ahead.
Safeway kicks off annual breast cancer awareness campaign
PLEASANTON, Calif. — Safeway’s annual fundraising initiative to benefit breast cancer research once again has commenced.
Each October, Safeway’s nearly 1,700 stores in the United States and Canada host a variety of breast cancer fundraising activities. In addition to providing customers with opportunities to donate at checkout, Safeway and a number of its suppliers get involved by donating $5-for-every-$30 spent on products with special pink ribbon tags. Safeway also sells special pink breast cancer reusable bags of which a dollar from each sale goes to the cause, the chain said.
The company has raised more than $94 million for the cause since 2001.
"More than 230,000 women in the U.S. alone will be diagnosed with breast cancer this year," said Larree Renda, Safeway EVP, Safeway Health president and Safeway Foundation chair. "Thanks to the engagement and generosity of our employees, customers and suppliers, we are funding projects and programs that will continue to have a meaningful impact on breast cancer cure rates."
NRF: Swipe-fee cut will save merchants and consumers billions
WASHINGTON — Retailers and their customers will save billions of dollars when new Federal Reserve regulations cutting debit card swipe fees roughly in half take effect this weekend, the National Retail Federation said.
“Retailers across the nation are developing a wide range of innovative ways to pass these savings along to their customers with lower prices and better value,” NRF SVP and general counsel Mallory Duncan said. “Change won’t come overnight, but consumers will definitely benefit. Reducing these fees will put billions of dollars back into the Main Street economy, helping American families stretch their paychecks and ultimately preserving and creating local jobs to keep America on the road to recovery.”
Under federal regulations made final this summer, the swipe fees, the nation’s largest banks charge merchants use to process debit card purchases, will be capped at no more than 21 cents per transaction – plus 0.05% of the purchase price and, in most cases, an additional 1 cent for fraud prevention – beginning on Saturday. That compares with 1% to 2% of the transaction – about 44 cents on the average retail purchase but several dollars on bigger-ticket items – under current fees. Debit card swipe fees currently total about $20 billion annually, and analysts have estimated the cap will save merchants and their customers about $7 billion. Small- and mid-size financial institutions with less than $10 billion in assets are exempt.
While the cap will produce considerable savings for retailers and their customers on most purchases, some merchants are upset that fees could actually go up on small-ticket purchases. The cap amounts to 27 cents on a $100 transaction, or about one-sixth the $1.50 collected under the current fee schedule. But the cap comes to 22 cents on a $2 soda or cup of coffee, for example, that currently carries a fee of only 8 cents. The regulations would allow banks to charge less than the cap for small purchases, but recent news reports indicate that Visa and MasterCard banks plan to instead charge the maximum allowed.
“Even as these regulations are about to go into effect, banks are trying to turn what is supposed to be a ceiling on these fees into the floor for small transactions even though those fees were already grossly out of proportion to the amount of the purchase,” Duncan said. “Unfortunately, this is all too typical of what we’ve come to expect from the card companies and their banks.”
A number of banks also have threatened to raise other fees in retaliation for the swipe-fee cap, but Duncan criticized their behavior,
“Every time Congress takes a step to protect consumers, the banks use it as an excuse to raise fees,” Duncan said. “That doesn’t mean Congress shouldn’t pass consumer protection laws. It speaks more to the nature of the card industry than to whether swipe-fee reform should have been passed.”