Positive Same-Store Sales Haven't Saved Rite Aid (RAD)

NEW YORK (TheStreet) -- Rite Aid (RAD) stumbled on Thursday despite reporting positive same-store sales growth. In what is proving a trend for retailer, investors sold off shares in the convenience store chain, pushing Rite Aid 3.8% lower to $5.78.

November same-store sales for the retail sector were released on Thursday and Rite Aid managed a 2.8% increase, boosted by strength in its pharmacy. Front-end same-store sales gained 0.4%, while pharmacy sales were up 3.9%, shrugging off the negative impact of new generic introductions. Prescription count at comparable stores was up 0.1%.

However, a positive increase was off of a low base as the stores were afflicted by the effects of Superstorm Sandy during the same month a year earlier. The drugstore noted the comparison to the month following Sandy boosted front-end same-store sales by 0.4% and prescription count growth by 1.6%.

The Pennsylvania-based business said same-store sales over the quarter ended Nov. 30 and year to date had increased 2.3% and 0.3%, respectively.

Rite Aid is slated to report third-quarter earnings in two weeks. Year to date, the stock has surged 323.5%.

TheStreet Ratings team rates Rite Aid Corp as a Hold with a ratings score of C. The team has this to say about their recommendation:

"We rate  (RAD) a HOLD. The primary factors that have impacted our rating are mixed -- some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations and solid stock price performance. However, as a counter to these strengths, we find that the company's profit margins have been poor overall."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • RAD's revenue growth has slightly outpaced the industry average of 4.2%. Since the same quarter one year prior, revenues slightly increased by 0.8%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • Powered by its strong earnings growth of 160% and other important driving factors, this stock has surged by 486.13% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
  • Net operating cash flow has significantly increased by 341.63% to $79.47 million when compared to the same quarter last year. In addition, Rite Aid Corp has also vastly surpassed the industry average cash flow growth rate of -45.60%.
  • The gross profit margin for Rite Aid Corp is currently lower than what is desirable, coming in at 30.14%. Regardless of RAD's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 0.52% trails the industry average.

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