Rite Aid research notes
1. Rite Aid began in 1962 called thrift D Discount Store. It is clinging to its position as a distant third (behind Walgreen and CVS) in the US retail drugstore business. The struggling company runs some 4,665 drugstores in about 30 states and the District of Columbia. Rite Aid stores fill prescriptions (more than two-thirds of sales) and sell health and beauty aids, convenience foods, greeting cards, and other items, including around 3,000 Rite Aid brand private-label products. About 60% of all Rite Aid stores are freestanding and 50% have drive-through pharmacies. 3. The key business opportunity is the demand for health products. The demand is driven by the aging of the US population and advances in medical treatment. Rite Aid sells two main types of products: prescription drugs, and "front-store" products, including over-the-counter (OTC) drugs, health and beauty aids, greeting cards, photo-finishing services, and general merchandise. Prescription drugs draw customers to the store, and they focus their efforts on the number of new prescriptions they fill. The larger drug store chains, which includes Rite Aid, typically generate about 70 percent of their sales from prescriptions; front-end items account for 30 percent. The number of front-store items has increased in recent years, as Rite Aid and other stores have started to offer a wider variety of items to customers.
One threat that it faces is its inventory management problem. Its continued problem of out-of-stock promotional inventory in its stores raises questions about the company’s ability to successfully execute key elements of its program. Missing sale inventory is a persistent problem. At least one of the selected sale items was missing in 78 percent of the 1,100 store visits. Forty percent of Rite Aid stores visited were missing sale inventory every time visited, and 70 percent of stores were missing inventory four out of five times visited.
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