Rite Aid 2016 Annual Report Download - page 5

PART I
Item 1. Business
Overview
Rite Aid is the third largest retail drugstore chain in the United States based on both revenues
and number of stores. As of February 27, 2016, we operated 4,561 stores in 31 states across the country
and in the District of Columbia.
In fiscal 2016, as we continued our transformation into a retail healthcare company, we began
reporting our business in two distinct segments. Our Retail Pharmacy Segment consists of Rite Aid
stores, RediClinic and Health Dialog. Our Pharmacy Services Segment consists of EnvisionRx, a
pharmacy benefit management (PBM) provider that we acquired in June 2015.
Retail Pharmacy Segment—In our Rite Aid retail stores, we sell prescription drugs and a wide
assortment of other merchandise, which we call ‘‘front-end’’ products. In fiscal 2016, prescription drug
sales accounted for 69.1% of our total drugstore sales. We believe that pharmacy operations will
continue to represent a significant part of our business due to favorable industry trends, including an
aging population, increased life expectancy, anticipated growth in the federally funded Medicare Part D
prescription program as ‘‘baby boomers’’ continue to enroll, expanded coverage for uninsured
Americans as the result of the Patient Protection and Affordable Care Act and the discovery of new
and better drug therapies. We carry a full assortment of front-end products, which accounted for the
remaining 30.9% of our total drug store sales in fiscal 2016. Front-end products include
over-the-counter medications, health and beauty aids, personal care items, cosmetics, household items,
food and beverages, greeting cards, seasonal merchandise and numerous other everyday and
convenience products.
We differentiate our stores from other national chain drugstores, in part, through our wellness+
with Plenti loyalty program, our Wellness format stores, innovative merchandising, private brands and
our strategic partnership with GNC, a leading retailer of vitamin and mineral supplements. We offer a
wide variety of products through our portfolio of private brands, which continue to be well received by
our customers. Private brand items contributed approximately 18.7% of our front-end sales in fiscal
2016.
The average size of each store in our chain is approximately 12,700 square feet, and average store
size is larger for our locations in the western United States. As of February 27, 2016, 62% of our stores
were freestanding; 54% of our stores included a drive-thru pharmacy; and 51% included a GNC store
within a Rite Aid store.
RediClinic, based in Houston and acquired by Rite Aid in April 2014 as a 100 percent owned
subsidiary, is a leading operator of retail clinics. RediClinics are staffed by board certified nurse
practitioners and physician assistants, who are trained and licensed to treat common conditions and
provide preventative services, in collaboration with local physicians who are affiliated with a leading
health care system in each market. Patients can be treated for more than 30 common medical
conditions and RediClinic’s clinicians are able to write prescriptions for these conditions when
appropriate. Additionally, RediClinics provide a broad range of preventive services, including
screenings, medical tests, immunizations and basic physical exams.
Health Dialog, a Boston-based 100 percent owned subsidiary that Rite Aid acquired in April 2014,
is a provider of health coaching, shared decision making tools and healthcare analytics. Health Dialog
helps health plans, employers and physician groups improve healthcare quality while reducing overall
costs. Health Dialog offerings include health coaching for medical decisions, chronic conditions, and
wellness; population analytic solutions; and consulting services.
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