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Rite Aid CEO: More wellness stores on the way
April 13th, 2012
CAMP HILL, Pa. – Rite Aid Corp. is stepping up the rollout of its "wellness store" format this fiscal year.
In a conference call with analysts on Rite Aid's fiscal 2012 fourth-quarter and full-year results, president and chief executive officer John Standley said the drug chain plans to remodel 500 stores to the wellness concept in fiscal 2013.
That marks a sharp acceleration from its plans for the recently finished fiscal year, in which Rite Aid targeted 300 wellness store conversions. Overall, the chain closed out the year with 4,667 drug stores.
"We have continued to convert high-performing stores to our new wellness format, ending the [fiscal 2012 fourth] quarter with a total of 280 wellness stores," Standley said during the call. "And while it's still early on in the process, we are starting to see a positive impact on our front-end sales. As we've previously discussed, these stores emphasize wellness empowerment through increased emphasis on clinical pharmacy services, new wellness-related items, and a more open store design to enhance the shopping experience."
A linchpin of the wellness format is the "wellness ambassador," who acts in a concierge role to assist customers in finding information and getting in touch with a pharmacist.
"We now have more than 400 wellness ambassadors with specially programmed iPads to help customers access quality information about over-the-counter products, vitamins and supplements," Standley said. "Wellness ambassadors provide information to customers and act as a bridge from the front end to the pharmacy, where pharmacists are available to offer clinical advice and help customers select the right products for their specific needs."
Rite Aid also aims to spur pharmacy business with more prescription file purchases this year. In fiscal 2012, the company spent over $35 million on Rx file buys.
"In the pharmacy, we will continue to embrace a new era of patient care by expanding our clinical service offerings with more focus on improving medication compliance and care for patients with diabetes," Standley said. "We will further build on this year's highly successful immunization program. We will also look to grow script count through initiatives such as prescription file purchases, for which we have earmarked $50 million for this year."
The chain's wellness+ customer loyalty program also will be a core growth focus, and plans call for expanded delivery of targeted offers to wellness+ members. Standley said wellness+ members represented 74% of front-end sales and 68% of prescriptions filled in the fiscal 2012 fourth quarter, up from 66% of front-end sales and 58% of prescriptions filled a year earlier.
"We have also continued to increase the amount of Gold and Silver members that we have in the program, which is important because these customers continue be our most valuable and most satisfied customers," he added.
Total wellness+ enrollment reached 52 million members in fiscal 2012, according to Standley. "With almost 2 years of member activity, we now have enough history and comparative data that, going forward, we will measure active members as those who have used their cards at least twice during the last 26 weeks," he said. "Using this measurement, we had 25 million active members at the end of the fiscal year, which is a 16% increase in active members over the same period last year."
Rival Walgreen Co.'s contract dispute with pharmacy benefit manager Express Scripts Inc., which ended up with Walgreens out of the PBM's pharmacy network as of Jan. 1, also has created an opportunity for Rite Aid to show consumers what it has to offer.
"Our store teams also did a great job in accommodating new customers who filled prescriptions with us due to the changes to the Express Scripts pharmacy benefit management network," Standley explained. "Our chainwide marketing campaign helped convince these customers to try our stores, and our store teams have responded by providing excellent service."
He added that in fiscal 2012 Rite Aid wrapped up a multiyear rollout of its "new and improved" store-brand program.
"We have converted about 2,900 items to this new architecture, and customers are responding positively to our private brands and package designs," Standley said. "For the quarter, private-brand penetration increased to 18.3%, from 16.5% in the prior-year period. Making our customers aware of the value offered by these items will continue to be a top priority heading forward."