Boston, MA – (NYSEPOST) – 04/17/2014 – Rite Aid Corporation (NYSE:RAD) has just reported a 2nd quarter results which forecasting very solid earnings-growth for the rest of the financial year. Even with some of the sales metrics continuing to be weak, the company as very successfully boosted its margins via its drug-sourcing efficiencies. A very recent drug distribution agreement was signed with McKesson. This agreement will now provide some additional benefits towards the later part of this year. Resultantly, the company’s recent turnaround seems quite sustainable. As it company works to continue its growing earnings and in reducing its debt, the RAD stock might just continue its ascent .
consecutive annual profit, and it is The company had begun racking up losses much before the onset of the Recession, and even up until 2012, the company was losing money. This was long after many other retailers has moved back successfully onto the path of recovery. The company’s profitability was facilitated has been attributed to 2 different events. Firstly- Walgreen had a very temporary dispute with a certain major pharmacy benefits-manager in 2012. This compelled very large percentage of Walgreen customers to fill-out their prescriptions at various other pharmacies. RAD managed in picking up a segment of these customers, and helped them drive a 3.4% rise in the same- store prescription count in its 2013 financial year.
Secondly, the company as well as many other chains of pharmacies benefited from the big wave of its new generic drugs that started in 2012 and then continued right into 2013. The generic drugs carry much higher profit-margins than their branded counterparts. This helped in driving gross margin up from 26.7 percent in the FY 2012 to 28.2percent in the FY 2013. Even up until a few months ago, it was not very clear whether the company’s profit improvement was actually sustainable and whether the company will be able to manage to maintain momentum for the rest of the year.