Rite Aid

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In recent years, Rite Aid (NYSE:RAD) stock has done little more than fight to survive. The Camp Hill, Pennsylvania-based pharmacy chain has long struggled against its peers and has failed at multiple attempts to sell itself to a competitor. This resulted in shareholders approving a 1-20 reverse stock split in April to avoid delisting. However, this did little to stem the tide.Source: Shutterstock The company temporarily boosted optimism when it joined the Amazon (NASDAQ:AMZN) delivery network. However, excitement over the deal quickly faded. Plus, a change in the CEO position has failed to stem the drop in the RAD stock price. Without a deeper partnership with Amazon, I see little reason to buy Rite Aid stock. Amazon Deal Brought Only Temporary ReliefThe Amazon deal initially sparked hope as it would increase foot traffic into Rite Aid stores. There's some logic to this argument. As our own Will Ashworth argues, the Amazon return program at Kohl's (NYSE:KSS) led to a 9% rise in foot traffic and an 8% revenue increase in stores which supported the return program. But will that be enough?InvestorPlace - Stock Market News, Stock Advice & Trading TipsI think some also hope this will lead to an Amazon purchase of Rite Aid itself. Such optimism has brought disappointment before. An attempt by Walgreens Boots Alliance (NASDAQ:WBA) to take over the company led instead to the sale of 1,932 Rite Aid stores to the pharmacy chain. Albertsons also tried to buy Rite Aid. This proposed union also fell through after RAD shareholders balked. * 10 Marijuana Stocks That Could See 100% Gains, If Not More Moreover, the Amazon deal failed to cure the ills of Rite Aid stock. Within a month, RAD stock had fallen to levels it saw before the Amazon announcement. Also, the recent ascendancy of Heyward Donigan to the CEO position has not stemmed the decline. Rite Aid Can No Longer CompeteAs a result, the RAD stock price now stands at about $5.60 per share. Certainly, Amazon and online sales have changed the dynamics of the pharmacy business for Rite Aid and its peers. Standalone pharmacies have long dealt with competition from both grocers and major retailers.Now with the threat of online competitors, margins feel more pressure than ever. This probably explains some of the reasons why CVS (NYSE:CVS) entered the insurance business and built in-house clinics.Rite Aid cannot follow suit. Just as the company needs to make significant changes to survive, RAD finds itself with both falling revenue and profits. Unfortunately, as a $300 million company with $6.4 billion in long-term debt, it has no financial room for such a pivot.Put simply, RAD stock has become the Sears Holdings (OTCMKTS:SHLDQ) or the JCPenney (NYSE:JCP) of pharmacies. Rite Aid has evolved into the type of business that consumers do not need in today's world.The fact that its typical customer is over 55 and earns under $40,000 per year does not bode well for its future. Moreover, competition forces it to sell what it does offer at thin margins. Unless and until Amazon or another major online retailer can make Rite Aid relevant, I see a dim future for RAD stock. The Bottom Line on RAD StockOnly a deeper partnership with Amazon can save Rite Aid. The changing retail pharmacy landscape has fundamentally changed Rite Aid's business. Unlike Walgreens and CVS, it lacks the necessary resources to improve its business and remain relevant. Debts remain too high, and numerous suitors have passed on what remains of Rite Aid.If results at Kohl's serve as an indication, Rite Aid stores will see more foot traffic and revenue. However, this does not change the fact that consumers can find anything Rite Aid offers elsewhere and probably at a lower price.If Amazon took over the stores entirely, perhaps the company could still play a significant role in today's pharmacy business. Barring that scenario, the time has come to think of Rite Aid stock as the next Sears.As of this writing, Will Healy did not hold a position in any of the aforementioned stocks. You can follow Will on Twitter at @HealyWriting. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 10 Marijuana Stocks That Could See 100% Gains, If Not More * 11 Stocks Under $10 to Buy Now * 6 China Stocks to Buy on the Dip The post Rite Aid Stock Continues to Fade into Irrelevance Despite Amazon appeared first on InvestorPlace. […]

One of my favorite things to do in the market is buy the dip in beaten up and undervalued stocks, but, only when doing so makes sense. When it comes, the reality is that buying the dip in Rite Aid (NYSE:RAD) simply doesn't make sense right now. Rite Aid has a long way to go.Source: Shutterstock The fundamentals are broken. The chart is broken. Investor sentiment is dour. There has been C-suite turnover. And, above all else, the outlook for a turnaround remains as bleak today, as it's ever been.As such, the most likely path forward for Rite Aid is lower revenues, lower profits, lower margins, and a lower stock price.InvestorPlace - Stock Market News, Stock Advice & Trading TipsTo be sure, there is a pathway here through a unique Amazon (NASDAQ:AMZN) partnership wherein RAD stock turns into a multi-bagger from current levels. But, that pathway lacks visibility and tangibility here and now. Until that pathway gains visibility and tangibility, Rite Aid stock isn't worth the risk. * 10 Cheap Dividend Stocks to Load Up On As such, the investment implication with RAD stock is crystal clear. First, sell now and stay away for the foreseeable future. Second, monitor the company and see if the Amazon catalyst does boost the numbers next quarter. Third, if it does, buy into the rebound. If it doesn't, continue to stay away until it does (if ever). Stay Away From Rite Aid Stock For NowThe big picture reality here is that Rite Aid is a broken company with very dour go-forward growth prospects.At one point in time, Rite Aid was a large pharmacy plus convenience store with a wide reach and busy stores. That was before the ecommerce era. Now, consumers can basically get everything they got at a Rite Aid 20 years ago, from Amazon, Walmart (NYSE:WMT), or CVS (NYSE:CVS) today, without ever having to leave their homes and probably at lower prices, too.Even further, because Rite Aid has struggled significantly over the past several years, the company has been left consistently cash-strapped. That means the company hasn't put as much money back into its stores or operations as peers.The result? Two-fold. One, Rite Aid's stores often look outdated next to Walmart or Target (NYSE:TGT) stores, which now have self check-out kiosks. Two, Rite Aid's e-commerce business isn't as built out as peer e-commerce businesses.As such, Rite Aid is the laggard in the pharmacy retail world today. Given its lack of resources, Rite Aid stock projects as the laggard for the foreseeable future, too. That means revenues will keep dropping. Margins will suffer from that loss of revenue scale. Profits will consequently drop more.As go profits, so go stocks. Thus, so long as this profit erosion trend remains in place, RAD stock will likely continue to slide lower. The Amazon Catalyst and Rite Aid StockThe bull thesis on RAD stock centers around a recent partnership with Amazon sparking a reversal in the current profit erosion trend at Rite Aid.This could happen. Rite Aid recently became a "fulfillment center" of sorts in Amazon's rapidly expanding distribution. That means Amazon customers can now pick up their Amazon.com orders in Rite Aid stores, which further means that Amazon customers will start going into Rite Aid stores.That's big, mostly because Amazon.com shoppers don't typically go into Rite Aid stores. Rite Aid's core shopper base is 55 & up and makes less than $40,000 a year. Amazon.com shoppers, on the other hand, skew young and rich aka, not Rite Aid shoppers.Most of these Amazon.com shoppers will likely walk into a Rite Aid store, say why would I ever shop here, pick-up their Amazon.com orders, and promptly leave. But, some of them could stick. That is, some will walk in, see something they like in the Rite Aid store (maybe Thrifty ice cream) and start shopping at Ride Aid with greater frequency.That's a long-running tailwind. Those Amazon.com shoppers are young, and their purchasing power is only going up. Thus, if some of those shoppers start shopping at Rite Aid in greater frequency, Rite Aid's revenues, margins, and profits will set out on a secular, multi-year uptrend.If that happens, RAD stock could be a multi-bagger from current levels, but, that's a big "if." As such, investors are best to wait for confirmation that this is happening, before taking a bet on a stock that has been a falling knife for several years. Bottom Line on Rite Aid StockI don't think all hope is lost for Rite Aid stock. Instead, I do think that the Amazon partnership could spark a huge fundamental trend reversal which ultimately causes RAD stock to double or triple from current levels.But, I also peg the likelihood of that reversal materializing at "very low." As such, the best thing to do here is to sell RAD stock and stay away until the numbers confirm that the Amazon partnership is providing a meaningful boost to Rite Aid's numbers.As of this writing, Luke Lango was long AMZN, WMT, CVS, and TGT. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 10 Cheap Dividend Stocks to Load Up On * The 10 Biggest Losers from Q2 Earnings * 5 Dependable Dividend Stocks to Buy The post Don't Count on Amazon to Save Rite Aid Stock Just Yet appeared first on InvestorPlace. […]

Rite Aid (RAD) closed the most recent trading day at $5.77, moving +1.76% from the previous trading session. […]

News that struggling drugstore chain Rite Aid (NYSE:RAD) has selected a new CEO wasn't the change shareholders were hoping for, if the recent RAD stock price plunge is any indication. Shares have fallen more than 20% since the 12th of August, when the company announced Heyward Donigan would be replacing John Standley as CEO, effective immediately.Source: Shutterstock Of course, poor performance may have been in the cards anyway. Rite Aid stock has been losing ground since the beginning of 2017, when Walgreens Boots Alliance (NASDAQ:WBA) first started to waffle on its plans to acquire the struggling company. By early 2018, the deal was pared back to only 1932 stores, and a price tag of only $3.6 billion.It's not enough cash for the company, now only 2500 stores strong, to buy its way out of the trouble it found itself in a few years back. Thank the competition from bigger CVS Health (NYSE:CVS) as well as Walgreens for that.InvestorPlace - Stock Market News, Stock Advice & Trading Tips * 10 Stocks Under $5 to Buy for Fall New leadership sometimes breathes new life into an old company though. In that light, Donigan's placement may well mark a turning point for Rite Aid, and by extension, for RAD stock.On the other hand, the crux of Rite Aid's woes aren't particularly elusive. The company lacks the scale Walgreens and CVS Health now enjoy, further exacerbating the fact that the drugstore chain has to spend too much for too little. Rite Aid Needs to Think BiggerIt's not from a lack of trying that Rite Aid has been unable to dig its way out of trouble. If nothing else, it has willingly been creative.Case in point: In June, it allowed Amazon (NASDAQ:AMZN) to establish parcel pickup lockers in 100 stores, with plans to offer online shopping deliveries at 1500 stores by the end of the year. That added foot traffic might lead more consumers into Rite Aid stores, where they just might make a separate purchase. The company is also testing telehealth options.The growth prospects of such initiatives are modest. Amazon's package pickup program may only draw a handful of additional consumers into any given store on any given day. Meanwhile, CVS plans to open actual medical clinics within 1500 of its 6200 stores by 2021 … an arguably better option than a virtual doctor's visit.Ergo, Rite Aid's biggest problem -- the aforementioned lack of scale -- remains a big problem. That is, it's not selling enough goods at the right price to adequately pay its bills. Selling stores to rival Walgreens rather than fixing those locales may have ultimately worsened the problem.Quantitative information affirms the qualitative idea. RAD Stock by the NumbersIt's curious. On a gross margin basis, Rite Aid outperforms or at least mirrors its rival pharmacy chains. In other words, the difference between its cost of merchandise and its retail price of that merchandise sold is as it should be.Where Rite Aid falls oddly short is in span between the income statement's gross profit figure and its EBITDA (earnings before interest, taxed and depreciation) figure. The pharmacy chain is only converting about half the revenue into earnings that its chief rivals are. The company's EBITDA rate, as a percentage of sales, are consistently less than half.There's only one key line between those two numbers on an income statement, by the way … selling and general/administrative expenses. Rite Aid's are considerably more than CVS Health's, and notably higher than Walgreens'. While the differences may look and feel modest for other types of industries, in the retailing arena where margins tend to be thin, the differentials are significant.Donigan's first task may be simply to figure out where that SG&A money is going.Some cost-cutting on that front may be able to restore an ever-shrinking cash flow that has limited the company's capacity to invest in its own growth. In fact, after years of steady declines, the company's operating cash flow has turned negative as of 2019. Bottom Line for RAD StockEasier said than done, to be fair. Some expenses are static and don't scale. Advertising expenses, for instance, cost from one organization to another regardless of how many stores are benefitting from those ads.Also bear in mind that Rite Aid operates a pharmacy benefits management outfit, and CVS is now teamed up with health insurer Aetna. The margin profiles described above aren't perfect apples-to-apples comparisons.These companies are akin enough to take note of the surprisingly wide scope of EBITDA margin and administration spending disparities. They're more alike than different and the numbers should be closer together.Only time will tell if patient owners of RAD stock will eventually be rewarded for that patience, just as only time will tell if Heyward Donigan will accept the fact that her company is smaller than its rivals, and must adjust accordingly where she can.There's little doubt, however, as to where and how Rite Aid is missing an opportunity. And the RAD stock price rebound may struggle to last until costs are curbed, even if culling those costs makes things tough.As of the time of this writing, James Brumley did not hold a position in any of the aforementioned securities. To learn more about James, visit his site at jamesbrumley.com, or follow him on twitter at @jbrumley. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 10 Cheap Dividend Stocks to Load Up On * The 10 Biggest Losers from Q2 Earnings * 5 Dependable Dividend Stocks to Buy The post New Rite Aid CEO Needs More Than Amazon Partnership to Drive RAD Stock Higher appeared first on InvestorPlace. […]