Rite Aid Rising PL Share Drives Aggressive Expansion

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June 28, 2011

Rite Aid private label market share increased nearly one point in the fiscal first quarter of 2012 from 15.3 percent last year to 16.2 percent due to customers continuing to search for value, John Standley, the drug chain’s president and CEO told analysts during a recent earnings call.

“We expect this consumer behavior to continue even if the economy improves,” he said “And we expect continued rollout and we'll continue the rollout of our new private brand architecture in the second quarter.”

Over the past year, Rite Aid rolled out 250 items with the company’s new packaging design as well as some brand refreshment to Rite Aid Pharmacy health products, Renewal personal care and beauty line, Pantry foods and household goods, Tugaboos baby line and Simplify, the chain’s “price fighter” brand.

“We have now converted 136 items into these brands and expect to have about 2,200 items in these new brands within the next 12 months,” Standley said. “Even though we've just started the rollout, we're getting great response from our customers and expect that with strong promotional support, good price positioning and continued development of new items, we'll continue to grow private brands sales, improve margin and meet the needs of today's customer.

Regarding its combo store tests with Supervalu’s Save-A-Lot discount chain, Standley said the current units continue to post sales gains, but noted that profit gains have not been as significant. Rite Aid recently signed a licensing agreement with Supervalu to test 10 Save-A-Lot Rite Aid combo stores in Greenville, S.C.

"I think we’re making some good progress with [the combo stores], but I think we have to convince ourselves that that’s a business that we can successfully execute and take good care of before we get too far down the line with this thing,” he said. “So we again remain very encouraged by the early results, but we’ve got some work to do."

The agreement with Save-A-Lot calls for adding their limited assortment food store concept to the front of 10 existing Ride Aid stores, which the drug chain will continue to own and operate. The front-end will carry Save-A-Lot products of about 1,300 SKUs as well HBC products provided by Ride Aid “with emphasis on our private brand,” Standley said.

“The Save-A-Lot portion of the store will have a full grocery shop, including prepackaged meat, produce and dairy, and will be up to 40 percent cheaper than traditional supermarkets,” he said.

The 10 stores remain opened during construction. The first store in Greenville will be completed next week with the remainder slated for October opening.

“We chose these stores in Greenville, because they have solid pharmacy business, but we need stronger sales on the front-end,” Standley said. “This new co-branded concept presents a unique opportunity to increase front-end sales in this market.”

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