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CAMP HILL, PA-Although the cost of new and relocated stores more than offset sales growth for Rite Aid Corp. in its fiscal first quarter, the chain is on track to open 125 additional new and relocated stores this year. “Growing the store base is critical to our long-term success,” said Mary Sammons, president and CEO, during a conference call, and she reiterated plans to add between 800 and 1,000 new and relocated units by 2010.

First-quarter net income fell to $10.9 million, compared with $33.4 million for the same quarter of the previous year. This is despite a slight revenue increase to $4.34 billion, versus $4.22 billion in first fiscal quarter a year ago. Same-store sales for the quarter also rose, up 3.6% from the past year’s first fiscal quarter.

Pharmacy sales out-performed front-end sales in comp stores for the quarter with increases of 4.4% and 2.1%, respectively. Prescription sales accounted for 64.3% of total sales and third-party prescription sales accounted for a whopping 95.2% of all pharmacy sales. “This shows that the initiatives we’ve put in place to grow our pharmacy business are working,” Sammons said.

Some of that improvement is a result of an increase in generic drugs, a trend that is expected to continue. Pharmacy gross margins decreased a bit for the chain during first quarter and are expected to be similarly narrow in second quarter. But management said it expects margins, particularly on new generics, to improve during the third and fourth quarters of the year.

“Improving the customer experience in the pharmacy is a high priority,” Sammons said. The effort encompasses store re-dos with drive-through convenience and a steady effort “to recruit and retain pharmacy talent,” although, “there’s a shortage in the pharmacy profession.” During the first quarter, “customers rated us higher, and wait-time fell,” she added.

During first quarter, the locally based drugstore chain opened three stores, relocated four, acquired two, closed seven and remodeled 13. On the basis of sales, Rite Aid is the nation’s third largest drugstore operator behind Walgreen Co. and CVS Corp. By the end of the quarter Rite Aid had 3,321 units in operation.

“As the new stores gain momentum, we expect they will be significant contributors to revenue and same-store sales growth,” said Sammons. Management said it anticipates same-store sales to improve by between 2% and 4% during fiscal 2006. Based on current sales trends, the company raised its fiscal 2007 sales guidance to between $17.4 billion and $17.65 billion.

Shares of RAD fell sharply following the release of first-quarter data on Thurs., June 22, but rose to $4.15 a share my mid-afternoon, which still represented a nearly 8.8% decline from the day’s opening of the NYSE. The 52-week high of $4.90 a share occurred on June 5 this year, and the 52-week low was $3.23 a share on Nov. 14, 2005.

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