"Obviously the opportunity is there because of the overlap" with Rite Aid's current portfolio, said Mary Sammons, the company's president and chief operating officer, during its Q4 conference call. "We will make every effort to do these in a timely manner."
Rite Aid management has so for only identified 24 stores it will divest as a result of the acquisition, which they expect to close by the end of next month. The closing will bring Rite Aid to about 5,000 East Coast units.
Right after the end of the Rite Aid's second quarter, management plans to have a 23-store pilot program in place to test the conversion of acquired stores into the Rite Aid banner. They predict that 50% of the new units will be converted by the end of its fiscal year 2008, which started March 4, and the rest completed by the next fiscal year's second quarter.
Eventually, executives plan to ramp up store openings and enter new geographic areas. There are 125 new stores planned for the coming year, up from 106 last year. During the fourth quarter, Rite Aid opened 19 new units, relocated 32 and closed eight.
Same-store sales during the quarter rose 3% year over year, 4.1% in pharmacy sections and 1.2% in stores' front ends. Non-pharmacy sales were hampered by heavy promotions by competitors, a weak Valentine's Day and underperformance in photo departments, says Rite Aid executives.
Meanwhile, revenues slide to just less than $4.6 billion from about $4.8 billion in the prior year's fourth quarter. Rite Aid's profit came in at $15.1 million, compared to just under $1.3 billion during the same year-ago period last year, when the company received a $1.2-billion tax benefit.
For the coming year, executives predict same-store sales to rise from 3.8% to 5.8% and total sales in the range of $25.3 billion to $26 billion.
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