Rite Aid 2015 Annual Report Download - page 5

coaching and medication compliance counseling extend our efforts well beyond filling prescriptions. We
believe that offerings such as these will gain additional momentum in a rapidly changing healthcare
environment.
In terms of our traditional drug dispensing business, generic prescription drugs continue to help
lower overall costs for customers and third party payors. We believe the utilization of existing generic
pharmaceuticals will continue to increase. The gross profit from a generic drug prescription in the retail
drugstore industry is generally greater than the gross profit from a brand drug prescription. However,
the sale amount can be substantially less and can impact our overall revenues and same store sales.
The retail drugstore industry is highly competitive and has been experiencing consolidation. We
believe that the continued consolidation of the drugstore industry, the competitive advantages from the
increasing trend towards vertical integration resulting from the combination of retail pharmacy
companies with pharmacy benefit managers, such as CVS Health, and aggressive generic pricing
programs at competitors such as Wal-Mart and various supermarket chains will further increase
competitive pressures in the industry. The pharmacy business has continued to be highly promotional,
which contributes to additional competitive pressures.
The retail drugstore industry relies significantly on third party payors. Third party payors, including
the Medicare Part D plans and the state-sponsored Medicaid and related managed care Medicaid
agencies, at times change the eligibility requirements of participants or reduce certain reimbursement
rates. These changes and reductions are expected to continue. When third party payors, including the
Medicare Part D program and state-sponsored Medicaid agencies, reduce the number of participants
and/or reduce their reimbursement rates, sales and margins in the industry could be reduced, and
profitability of the industry adversely affected. These possible adverse effects can be partially or entirely
offset by lowering our product cost, controlling expenses, dispensing more higher margin generics,
finding new revenue streams through pharmacy services and dispensing more prescriptions overall.
Strategy
Our strategy for fiscal 2016 is to further position Rite Aid for growth while accelerating our
transformation into a retail healthcare company that provides a higher level of care to the communities
we serve. This strategic objective will not only allow us to better meet the needs of our customers and
patients in a rapidly changing healthcare environment, but will also help us to continue the positive
financial momentum we have generated over the past several years.
Financially, our primary goal for fiscal 2016, consistent with fiscal 2015, is to continue growing
same stores sales. By growing same store sales, we can take full advantage of our recent cost control
improvements, including the refinancing transactions we completed in fiscal 2015.
In order to drive our financial performance and sustainable sales growth, we will continue to invest
capital into our store base through initiatives such as prescription file buys and our Wellness store
remodel program as we also build up our real estate pipeline for additional store relocations and net
new stores in the coming years. In addition, we will continue strengthening our unique brand of health
and wellness by teaming with partner companies to further enhance our highly successful wellness+
customer loyalty program through various initiatives, including the recently announced wellness+ with
Plenti. As we enter a period of rapid change in the U.S. healthcare industry, we will also continue
expanding our healthcare offering to meet the growing demand for high quality, convenient and
affordable health services, including immunizations, medication compliance consultations, retail clinics
and health coaching. And, after the recent announcement of our agreement to acquire the EnvisionRx
pharmacy benefit management company, we hope to create a stronger, more integrated healthcare
offering that delivers a greater level of choice and access to care for customers while positioning Rite
Aid to better compete in the evolving healthcare marketplace. We expect that these continued
investments and our focus on key initiatives will generate long-term value for our shareholders.
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