Rite Aid’s healthcare investments are paying off

December 18, 2014, 3:14 PM UTC
Inside Rite Aid Ahead of Earnings Reports
A customer enters a Rite Aid Corp. store in Mechanicsburg, Pennsylvania, U.S. on Thursday, Dec. 15, 2011. Rite Aid Corp., the third-largest U.S. drugstore chain, is scheduled to report third quarter earnings results on Dec. 15 following the close of U.S. financial markets. Photographer: Paul Taggart/Bloomberg via Getty Images
Photograph by Paul Taggart — Bloomberg/Getty Images

Rite Aid reported third quarter earnings Thursday that came in above analysts’ expectations, and the positive results may continue: the drug store chain raised its outlook for fiscal 2015. Here’s what else you should know about Rite Aid’s earnings.

What you need to know: Rite Aid (RAD) has been revamping its healthcare offerings under its “Road to Wellness” program. This includes remodeling its stores, beefing up its pharmacy business and positioning itself on the continuum of care with its new health-coaching business.

The investments have been paying off. Rite Aid’s profit margins have gone from negative 1.4% in 2012 to positive 1.1% over the last 12 months.

The big numbers: Rite Aid brought in $6.7 billion in sales last quarter, surpassing the average analyst estimate of $6.64 billion. Profits were similarly higher, reaching 10 cents a share, 150% higher than a year earlier and double what analysts had expected to see, according to Bloomberg data.

What you might have missed: Rite Aid has been remodeling its stores from its older format into a wellness model that focuses on the pharmacy business. This includes a new product mix of wellness-centered items. To date, the company has revamped 33% of its stores nationwide. That’s helped boost same-store sales, which are up 5.4% year-over-year. Much of that growth can be attributed to its pharmacy business, which saw same-store sales rise 7.2% year-over-year.

“Our focus on expanding our health and wellness offering and delivering a higher level of care to the communities we serve drove our strong same-store sales, prescription count and gross profit,” said CEO John Standley.

That approach is working so far for Rite Aid, and it looks like the gains will continue through 2015. Sales are expected to be between $26.25 billion and $26.4 billion with earnings-per-share between 31 cents and 37 cents.