Rite Aid’s fourth-quarter and full-year results lacked savor. Revenue for the quarter was $5.38 billion compared to $5.39 billion a year ago, with a net loss of $255.6 million from continuing operations. For the year, revenue was up 0.1%, rising from $21.5 billion to $21.6 billion. Despite a significant shake-up on the senior leadership team and a last-ditch stock split to remain listed on the NYSE, the retailer was remarkably positive and laid out a comprehensive strategy for the future of the company.

Here are a few key takeaways from the earnings call:

Looking toward the future

CEO John T. Standley outlined the three key pillars of Rite Aid’s strategy going forward. First, the retailer will leverage and more clearly align its unique capabilities, specifically related to the pharmacy; second, Rite Aid will focus on reimagining its front-end offer to capture the right selection of products and services; and third, Rite Aid will continue its efforts to transform its processes and procedures to ensure strong cost discipline.

Evolving the front store

Following the lead of CVS and Walgreens, Rite Aid plans to reimagine its retail offering and better position itself as a health destination. The retailer’s front store will undergo a full SKU optimization program, shifting the product mix for a greater emphasis on health & wellness categories. Joining its larger competitors in the drug channel, Rite Aid will stop selling some of its tobacco-based products, ending the sale of electronic cigarettes and vaping products. Tobacco itself is still valuable and important for the retailer, and it’s unlikely that it will ever completely pull out the category. Rite Aid will also introduce new private label in consumables and beauty to highlight this new health centricity; early in FY 2020, the retailer will relaunch its OTC brand Rite Aid Pharmacy. Finally, the retailer will pilot the sale of CBD-based products in Oregon and Washington and plans to offer new clinical services. Many of these announcements weren’t particularly shocking or revolutionary, but these moves are vital for Rite Aid, who is still playing catch-up with the two “elephants in the room” known as Walgreens and CVS.

Elsewhere, COO Bryan B. Everett announced a partnership with Amazon, stating that his retailer will add Amazon Lockers to more than 900 locations. This new collaboration is a surprising development in the drug channel, boosting the digital “cred” of a retailer not particularly known for its omnichannel capabilities. While it’s far too early to say whether Rite Aid’s relationship with Amazon will be successful, it marks an interesting step by the ecommerce giant into a channel it is slowly entering through acquisitions like PillPack.

Significant changes in leadership

Beyond those early exits in March, Rite Aid has been busy hiring and spent much of the earnings call introducing a new senior leadership team aligned to Rite Aid’s goals. Matt Schroeder was introduced as the retailer’s new Chief Financial Officer, while Jocelyn Konrad, a licensed pharmacist with experience in the channel, became the new Executive Vice President of Pharmacy and Retail Operations, and Bryan Everett was named as Rite Aid’s Chief Operating Officer. With Standley leaving and Rite Aid on the hunt for a new CEO, the company is making a clean break from the past - leaving behind its failed mergers and acquisitions - to present itself as a potential power regional player.

After a challenging year, Rite Aid appears confident that it can prove to its investors that its new-look senior leadership team is capable of steering the retailer toward a more profitable future. With a SKU optimization program on the horizon and a renewed focus on private label and its clinical services, Rite Aid is shoring up the fundamentals, investing on what it knows best. It’s too early to say how these plans will shake out, but one can’t blame Rite Aid for trying.

For more information, please contact:

Ben Antenore, Analyst

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