Author: Helen Thomas

September 4, 2014

Rite Aid reported a 3.2% lift in sales for the 26 weeks ended August 30, ringing in $12.9 billion.

Same-store sales for the period increased 3.6% over the prior-year period.  Front-end same store sales increased 0.6%, while pharmacy same store sales increased 5.1%.  Prescription count at comparable stores increased 3% over the prior-year period.

Prescription sales represented 68.6% of total drug store sales for the 26 week period, and third party prescription sales represented 97.5% of pharmacy sales.

Same-store sales for the 13 week period ended August 30 increased 4.1% over the prior-year period.  Front-end same store sales increased 1.1% while pharmacy same store sales increased 5.6%.  Prescription count at comparable stores increased 3.7% over the prior-year period.

Total drug store sales for the 13 week period increased 3.7% with sales of $6.5 billion.  Prescription sales represented 68.8% of total drug store sales.

Rite Aid posted sales of $2.5 billion for the five weeks ended August 30, representing a 3.7% lift.  Same-store sales increased 3.9% over the prior-year period.  August front-end same-store sales increased 1.1%.  Pharmacy comparable sales, which included an approximate 219 basis points negative impact from new generic introductions, increased 5.2%.  Prescription count at comparable stores increased 3.7% over the prior-year period.

Prescription sales accounted for 69.3% of drug store sales.

Source: Retailing Today 

September 4, 2014

Just two days after reporting second quarter results, Fred’s posted August results.  Improved sales and traffic in the month were driven, according to CEO Bruce A. Efird, by initiatives that the company implemented for the first time in August.

Total sales for the month increased 6% to $147.6 million from $139.4 million in August 2013.  Comparable store sales for the month increased 2.3% compared with flat store sales in the same period last year.

“We saw ongoing improvements in virtually all general merchandise departments during August, and our pharmacy department continued to post strong growth in comparable scripts and sales,” said Efird.  “Going forward in the third quarter, we will continue to transform Fred’s based on the convenience/pharmacy-centric model we recently outlined, a strategy that brings clear advantages to our store operations and customers.”

During the month, Fred’s opened three Xpress pharmacy locations.

Fred’s operates 707 discount general merchandise stores, including 21 franchised Fred’s stores, in the southeastern United States.

Source: Retailing Today

September 4, 2014

In July, 2014, annual inflation as measured by the Harmonized Index of Consumer Prices (HICP) declined in 10 of the 16 economies compared, including in the U.S., Japan and the Euro Area as a whole.

Spain experienced the largest decline in price growth (from 0.0 to -0.4 percent), returning to deflationary territory for the second time this year.  Inflation in Switzerland (-0.1 percent) was unchanged, meaning that the Swiss economy also remains in a deflationary environment.  Prices accelerated substantially in Norway (from 1.8 to 2.2 percent), followed by slight gains in Denmark (from 0.4 to 0.5 percent).

“In July, inflation continued to slow in most European economis compared and reached a five year low in France, Italy, Spain, and Belgium,” said Elizabeth Crofoot, Senior Economist with the International Labor Comparisons program at The Conference Board.  “German inflation has also been on a slowing path, declining from nearly 2 percent 12 months ago to 0.8 percent in July.  As price growth is one factor determining cost competitiveness, slowing German prices makes it increasingly difficult for firms in the Euro Area to compete against the region’s largest economy without increases in productivity or further cost reductions.”

July inflation remains below 1 percent in all Euro Area countries compared, except Austria (1.7 percent).  Inflation is above 1 percent in Japan (4.1 percent), Norway (2.2 percent), the U.S. (1.8 percent) and the United Kingdom (1.6 percent).

Source: The Conference Board

September 4, 2014

Walgreens reported August sales of $6.4 billion, an increase of 3.6% from the same month in fiscal 2013.  Total sales for fiscal 2014 were $76.4 billion, an increase of 5.8% from fiscal 2013.

Total front-end sales increased 2.1% in August compared with the same month in fiscal 2013, while comparable-store front-end sales increased 1.4%.  Customer traffic in comparable stores decreased 1.7% while basket size increased 3.1%.

Prescriptions filled at comparable stores increased by 1.1% in August and increased 3.2% on a calendar day-shift adjusted basis.  August 2014 had one additional Sunday and one fewer Thursday compared with August 2013.  These calendar shifts negatively impacted prescriptions filled at comparable stores by 210 basis points.

August pharmacy sales increased by 5.4%.  Comparable-store pharmacy sales increased 5% and increased by a calendar day-shift adjusted 7.1%.  Calendar day-shift adjusted comparable-store pharmacy sales were negatively impacted by 180 basis points due to generic drug introductions in the last 12 months.  Pharmacy sales accounted for 65.7% of total sales for the month.

Sales in comparable stores increased by 3.7% in August.  Calendar day shifts negatively impacted total comparable sales by 140 basis points.  Generic drug introductions in the last 12 months negatively impacted total comparable sales by 120 basis points.

Total sales for fourth quarter 2014, which ended August 31, were 19.1 billion, up 6.2%.  Comparable store sales for the fourth quarter of fiscal 2014 increased 5.6%, while front-end comparable store sales for the quarter increased 1.3%.  Prescriptions filled at comparable stores increased 3.9% in the fourth quarter and comparable pharmacy sales increased 8.2%.

Calendar 2014 year-to-date sales for the first eight months were $50.9 billion, an increase of 5.7% from $48.2 billion in 2013.

Walgreens stated on its August 6, 2014 conference call with analysts that in the fourth quarter, it expected gross profit margin to be down a similar percentage year-over-year to what was experienced in the third quarter.  This is due to ongoing gross profit margin pressures, including recent changes in the environment of the company’s pharmacy business including ongoing generic drug inflation, reimbursement pressure and a shift in pharmacy mix toward 90-day prescription refills at retail locations and Medicare Part D.  The company also pointed out that last year’s fourth quarter included net gains from certain litigation matters, which reduced selling, general and administrative expenses by just under 1 percentage point.

Walgreens opened 23 stores during August, including four relocations, and closed five.  On August 31, Walgreens operated 8,309 locations in all 50 states, the District of Columbia, Puerto Rico and the U.S. Virgin Islands.  That includes 8,206 drug stores, 91 more than a year ago, including 70 net stores acquired over the last 12 months.  The company also operates infusion and respiratory services facilities, specialty pharmacies and mail service facilities.  Its Take Care Health Systems subsidiary manages more than 400 in-store convenient care clinics.

Source: Retailing Today

September 5, 2014

Dollar Tree and Family Dollar have amended their merger agreement to include a commitment by Dollar Tree to divest as many stores as necessary or advisable to obtain antitrust clearance for the previously announced cash and stock transaction.

All other terms and conditions of the merger agreement remain the same as announced on July 28, 2014.  The two companies also said that their expectations for a closing date for the transaction have accelerated to as early as the end of November 2014.

News of the amended merger agreement coincided with Family Dollar’s rejection of Dollar General’s revised proposal made on September 2 on the basis of antitrust regulatory considerations.

Dollar Tree and Family Dollar expect the Federal Trade Commission to issue a second request for additional information on September 8, and said they are confident that regulatory approval will be obtained.

“Dollar Tree is committed to working hard to complete our acquisition of Family Dollar as quickly as possible.  Our amended agreement is clearly superior to Dollar General’s revised proposal based on antitrust risk, deal certainty and time value of money,” said Bob Sasser, Dollar Tree’s CEO.  “Unlike Dollar General, we expect to be required to divest few, if any, stores because our business model is significantly different from Family Dollar’s model.  Our product assortment and pricing is not driven by local competition, and we have very limited store overlap.  As evidence of our confidence in and commitment to closing this transaction without delay, we are amending our merger agreement to provide for a commitment to divest as many stores as necessary to obtain antitrust clearance.”

Under the terms of the agreement announced on July 28, Family Dollar shareholders will receive $59.60 in cash and $14.90 equivalent in Dollar Tree shares for each common share of Family Dollar owned, subject to a collar.  At closing, Family Dollar shareholders would own no less than 12.7% and no more than 15.1% of the outstanding common stock of Dollar Tree.

“Dollar Tree and Family Dollar continue to have productive discussions with the FTC,” added Sasser, “and despite the anticipated second request from the FTC, we remain confident in our ability to complete our transaction with Family Dollar by as early as the end of November 2014 and deliver expeditiously the closing certainty and substantial value that this transaction provides to both companies’ shareholders, customers and employees.  We will continue to work hard to complete our acquisition of Family Dollar as quickly as possible.”

Source: Retailing Today 

September 5, 2014

Family Dollar has rejected the revised proposal made by Dollar General on September 2 on the basis of antitrust regulatory considerations.  The Dollar General offer may be financially superior, the dollar store noted, but it’s not likely to pass muster with the Federal Trade Commission.

“Our board of directors, with the assistance of outside advisors and consultants, reviewed all aspects of Dollar General’s revised proposal and unanimously concluded that it is not reasonably likely to be completed on the terms proposed,” stated Howard Levine, chairman and CEO of Family Dollar.  “There is a very real and material risk that the transaction proposed by Dollar General would fail to close, after a lengthy and disruptive review process.  Accordingly, our board has rejected Dollar General’s revised proposal and reaffirmed its support of the transaction with Dollar Tree, which delivers attractive value in the form of immediate upfront cash and upside participation in a combined Dollar Tree – Family Dollar entity, as well as closing certainty.”

“We are focused on delivering to Family Dollar shareholders the highest value with certainty, and the Dollar Tree transaction does just that.  Dollar Tree has taken the antitrust risk off the table by committing to divest as many stores as necessary to obtain antitrust clearance.  We remain fully committed to the Dollar Tree transaction,” added Ed Garen, a Family Dollar director and co-founder and chief investment officer at Trian Fund Management.  “Dollar General’s revised proposal, on the other hand, does not eliminate regulatory risk for Family Dollar shareholders.  Dollar General has repeatedly stated that antitrust is not a risk, yet they have put forth proposals that require Family Dollar shareholders to bear the ultimate risk.  Receiving a reverse breakup fee with an after-tax value of less than $3 a share does virtually nothing to compensate the Family Dollar shareholders for assuming that risk.”

Family Dollar’s merger agreement with Dollar Tree contains a customary provision that permits Family Dollar to enter into discussions and share information with any competing bidder, but only if the board is able to determine that failure to do so would be inconsistent with its fiduciary duties and that the unsolicited, written proposal from the competing bidder would be reasonably expected to lead to a proposal that is not only financially superior, but also “reasonably likely to be completed on the terms proposed.”

Family Dollar contends that the FTC would take a more critical review of any proposed Dollar General/Family Dollar merger.

The Family Dollar Board’s unanimous determination to reject Dollar General’s revised proposal and to accept Dollar Tree’s commitment to divest as many stores as required for antitrust approval follows the unanimous recommendation of a committee of four non-management independent directors that has been overseeing the company’s consideration and exploration of strategic alternatives since January 2014.  This committee consists of Glenn Eisenberg, Ed Garden, George Mahoney, Jr. and Harvey Morgan.

Source: Retailing Today 

September 5, 2014

NRF calculated retail industry (excluding auots and gasoline) employment declined by 17,700 jobs in August, with significant downward revisions for July and June.  Loss leaders included food and beverage stores, which witnessed a 17,000 job loss, possibly suggesting a seasonal or category-specific anomaly.

“Employment figures for August were undoubtedly disappointing and lackluster,” NRF Chief Economist Jack Kleinhenz said.  “The weaker job growth in August presents a mixed picture of the economy compared to other positive indicators, including consumer confidence and average hourly earnings, which point to an improving economy.”

“Today’s jobs report calls into question how much momentum the economy will show in the second half of the year,” Kleinhenz said.  “The employment situation report just does not fit into the overall economic landscape.”

The U.S. Bureau of Labor Statistics Employment Situation Summary showed that total nonfarm payroll employment rose by only 142,000 in August.  The unemployment rate fell slightly to 6.1 percent and the civilian labor participation rate came in at 62.8 percent.

Source: National Retail Federation

September 3, 2014

• August posts strong increase following small loss in July
• Large gains for California, Michigan, Illinois and Florida

Online advertised vacancies gained 164,600 to 5,209,200 in August, according to The Conference Board Help Wanted OnLine (HWOL) Data Series released today.  The July Supply/Demand rate stands at 1.9 unemployed for each advertised vacancy with a total of 4.6 million more unemployed workers than the number of advertised vacancies.  The number of unemployed was 9.7 million in July.

“Labor demand has shown some renewed strength over the past three months with an average increase of 102,000 per month,” said Gad Levanon, Director of Macroeconomics and Labor Markets at The Conference Board.  “The 2014 gains through August are an improvement over the slower-paced gains of 2013 for the same period.”

In August the professional occupations continued to show improvements after earlier 2014 losses.  Gains included Business and Finance (10,700), Computer and Math (19,300), and Healthcare (24,200).  The Services/Production occupations also showed gains in Office and Administration (20,100), Sales (13,900), and Food Preparation (12,300).

August Changes for States

In August, online labor demand was up in 45 states and down in five states.  All four regions experienced gains.

The Midwest experienced the largest August gain, at 54,200.  The largest gain occurred in Michigan (15,200) to 174,900.  Illinois rose 12,500 to 213,900.  Wisconsin (+6,300 to 112,400), Ohio (+4,400 to 181,700), Missouri (+2,600 to 84,500), and Minnesota (+1,900 to 125,500) also saw improvement.  Among the smaller states in the region, Indiana rose 5,800 to 90,200; Iowa rose 2,900 to 62,500, and Kansas rose 1,000 to 47,400.  North Dakota and South Dakota inched up with gains of 500 and 200 respectively.

The South grew by 47,800 in August.  By far the largest gain among larger states in the region was Florida’s increase of 11,900 to 273,000.  Texas gained 7,400 to 400,400, followed by Virginia (+5,000 to 150,400), North Carolina (+4,100 to 132,700), Georgia (+3,300 to 148,700), and Maryland (+1,900 to 105,100).  Among the smaller states, South Carolina was up 3,300 to 67,800 and Kentucky rose 1,900 to 51,400.  Alabama and Mississippi were up 800 and 600 respectively, while West Virginia fell 500.

The West experienced a gain of 47,700, led by a spike of 32,300 in California to 579,200.  Colorado (+7,600 to 130,500) and Arizona (+4,300 to 99,400) also saw gains, while Washington fell 400 to 127,200.  Among the smaller states in the West, Oregon (+4,800 to 73,000) led gains, followed by Idaho (+1,900 to 25,600) and Hawaii (+900 to 21,000).  New Mexico saw a slight gain of 800 while Utah dropped 1,500 and Alaska fell 600.

The Northeast rose 12,900, reflecting gains in Massachusetts (+7,900 to 157,300), New Jersey (+6,700 to 147,600) and New York (+5,100 to 308,600).  Pennsylvania dropped 16,100 to 202,200.  In the smaller states, Connecticut gained 2,200 to 72,900; New Hampshire gained 1,700 to 31,200; and Rhode Island gained 1,000 to 21,200.  Maine and Vermont were both up slightly by 500.

Metro Area Highlights

• In August, among the 20 largest metro areas, two (Houston and Philadelphia) declined, 17 gained, and one (Cleveland) remained constant
• Of the 52 metro areas for which Help Wanted Online provides monthly data, 46 gained advertisements, four (including Pittsburgh and Salt Lake City)lost, and 2 (Cleveland and Buffalo) remained constant

Occupational Highlights

• In August all of the 10 largest online job categories posted gains

Source: The Conference Board

September 3, 2014

CVS Caremark is changing its corporate name to CVS Health to reflect its broader health care commitment and its expertise in driving the innovations needed to shape the future of health.

“For our patients and customers, health is everything and CVS Health is changing the way health care is delivered to increase access, lower costs and improve quality,” announced Larry J. Merlo, President and CEO, CVS Health.  “As a pharmacy innovation company at the forefront of a changing health care landscape, we are delivering breakthrough products and services, from advising on prescriptions to helping manage chronic and specialty conditions.”

CVS Health includes the company’s retail business, which continues to be called CVS/pharmacy; its pharmacy benefit management business, which is known as CVS/caremark; its walk-in medical clinics, CVS/minuteclinic; and its growing specialty pharmacy services, CVS/specialty.  With 7,700 retail pharmacies, 900 walk-in medical clinics, a leading pharmacy benefits manager with nearly 65 million plan members, and expanding specialty pharmacy services, CVS Health enables people, businesses and communities to manage health in more affordable, effective ways.

As a further demonstration of its commitment to health, CVS Health also announced the end of tobacco sales at CVS/pharmacy as of September 3, nearly a month ahead of the previously targeted date of October 1.  In February, the company announced that it would end the sale of cigarettes and tobacco products at its CVS/pharmacy stores, making CVS/pharmacy the first and only national pharmacy chain to take this step in support of the health and well-being of its patients and customers.

“Along with the start of CVS Health, the sale of cigarettes and tobacco products at CVS/pharmacy ends today.  By eliminating cigarettes and tobacco products from sale in our stores, we can make a difference in the health of all Americans,” Merlo declared.

“Today, as CVS Health, we are tobacco-free, reinventing pharmacy and taking our place among leaders in the health care community,” Merlo concluded.

Source: Retailing Today 

September 2, 2014

Fred’s second quarter results reflected the company’s strategic decision to build its business model for the future as a convenience/pharmacy-centric store, driven by data-based inventory management, according to CEO Bruce Efird.

The company reported a net loss of $16.4 million for the quarter.  Fred’s total sales for the second quarter of fiscal 2014 increased 2% to $491.2 million.  On a comparable-store basis, second quarter sales decreased 0.1%.

The dynamic challenges the company faced surfaced in fourth quarter 2013 throughout its general merchandise and pharmacy departments.  Customer trips came under pressure from what Efird referred to as “Internet intrusion,” while generic drug price inflation ramped up faster than the company’s payer increases were occurring.  Although its second quarter results were disappointing, Efird pointed to several key wins.

“We saw improvement in general merchandise sales and customer traffic from our new marketing program, which indicates positive traction for the future,” he said.  “In pharmacy, we completed the prime vendor agreement that has substantial benefits to all aspects of our pharmacy operations and our specialty division, with components needed to support our accelerated investment in pharmacy acquisitions.”

In January, the company took a look at its processes and concluded that retail would not continue with business as usual and changes would have to take place.

“From this thinking came key changes that will drive the transformation of the stores to a convenience/pharmacy-centric store, which began in the second quarter,” Efird explained.

Those changes included an acceleration of pharmacy acquisitions that will help Fred’s achieve a target of reaching a 65% to 70% penetration rate of stores with a pharmacy.  Fred’s derived 40.4% of its sales from pharmaceuticals in the second quarter, compared with 36.4% for the same period a year ago.

Changes also included a new marketing plan, directed at driving customer traffic through multiple avenues, including expanded ad circulars and in-store programs.

The company has been using data-driven inventory and category-management tools and metrics, as well as processing changes to distribution and store procedures to get inventory directly from the truck to the store floor in the same day.  It also plans on closing 60 stores that do not fit the thresholds of the convenience/pharmacy-centric store model, allowing a reallocation of capital.

Fred’s also expanded its leadership.  It named Jerry Colley as EVP Store Operations; Ken Donahue as SVP and Chief Information Officer; Craig Barnes as SVP Global Sourcing and Hardlines Merchandising responsibility; and Kelly Ma as VP International and Domestic Sourcing.

Source: Retailing Today