Good flu season was bad news for Rite Aid

Business

(AP Photo/Matt Rourke)

CAMP HILL, Pa. (WHTM) — When was the last time you bought over-the-counter cold medicine or picked up a flu-related prescription?

If you’re like a lot of people, the answer is “not recently,” and that happy health news — what Rite Aid described Thursday morning as a “historically soft cough, cold and flu season” — was bad business news for the company, which operates about 2,500 stores in 17 states.

The company lost $18.5 million for the quarter that ended on February 27, 2021, an improvement over a loss of $343.5 million for the equivalent quarter a year earlier. During a call with financial analysts and media, executives spoke repeatedly of the company’s “turnaround.”

Flu-related prescription sales dropped 40% compared to a year earlier, and non-prescription cold and flu sales dropped 37%. Overall, sales in stores open at least a year dropped 5% excluding tobacco products (closer to 6% including these).

For the current quarter, Rite Aid expects same-store sales to decline 7% to 9% but overall expects losses to narrow further — it could even eke out a small profit. Why? What the pandemic taketh away, the pandemic giveth, and COVID-19 vaccinations have been a boon — not only because of the money Rite Aid earns for the estimated 4 million vaccines it expects to administer this quarter.

“It’s super exciting to see the customers come out of the consultation room” after being vaccinated, Heyward Donigan, the company’s president and CEO, said during the call. “They are cheering, and they are ecstatic” and sometimes buy discretionary items like candy or ice cream before leaving the store.

Executives said Tuesday’s suspension of Johnson & Johnson vaccine administration has had a minimal impact so far, because Johnson & Johnson accounts for a small percentage of shots that Rite Aid administers.

For the long term, the company is excited that 75% of the people it’s vaccinating are not regular Rite Aid customers. It hopes they’re having positive experiences in the store and will return. Jim Peters, the company’s chief operating officer, said Rite Aid is trying to “give them as much of a Rite Aid experience as we can, a new Rite Aid experience,” alluding to an inability until recently to invest as much as larger competitors like CVS and Walgreens in modernizing its stores. CVS has about 10,000 stores in the U.S.; Walgreens has about 9,000.

Other priorities include the continued integration of Elixir, a pharmacy benefits division that Rite Aid bought in 2015; the continued “refresh” of stores that haven’t yet been modernized; and a revamp of its store-brand line of products.

Although it didn’t quantify this, the company benefited from the third federal stimulus as money flowed into the bank accounts of most Americans. “We did see a spike related to the timing of the stimulus checks,” Peters confirmed.

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