Rite Aid 2013 Annual Report Download - page 4

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 March 2, 2013, we operated 4,623 stores in 31 states across the country
and in the District of Columbia.
In our stores, we sell prescription drugs and a wide assortment of other merchandise, which we call
‘‘front-end’’ products. In fiscal 2013, prescription drug sales accounted for 67.6% of our total 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’’ start 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 32.4% of our total sales in fiscal 2013. 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 also offer various photo processing services in virtually all our stores.
We attempt to distinguish our stores from other national chain drugstores, in part, through our
wellness + loyalty program, our Wellness format stores, private brands and our strategic alliance with
GNC, a leading retailer of vitamin and mineral supplements. We offer a wide variety of products under
our private brands, which are well received by our customers and contributed approximately 18.3% and
17.0% of our front-end sales in the categories where private brand products were offered in fiscal 2013
and fiscal 2012, respectively.
The overall average size of each store in our chain is approximately 12,600 square feet. The
average size of our stores is larger in the western United States. As of March 2, 2013, 61% of our
stores were freestanding; 52% of our stores included a drive-thru pharmacy; and 47% included a GNC
store within Rite Aid store.
Our headquarters are located at 30 Hunter Lane, Camp Hill, Pennsylvania 17011, and our
telephone number is [phone]. Our common stock is listed on the New York Stock Exchange
under the trading symbol of ‘‘RAD.’’ We were incorporated in 1968 and are a Delaware corporation.
Industry Trends
The rate of pharmacy sales growth in the United States has slowed in recent years, driven by a
decline in new blockbuster drugs, a longer FDA approval process, drug safety concerns, higher copays,
the loss of individual health insurance with the rise of unemployment and an increase in the use of
generic (non-brand name) drugs, which are less expensive but generate higher gross margins. However,
we expect prescription usage to grow in the coming years due to the aging U.S. population, increased
life expectancy, ‘‘baby boomers’’ becoming eligible for the federally funded Medicare prescription
program and new drug therapies. Furthermore, we expect that the estimated additional 27 million
people who will be covered by health insurance in 2014, as well as the closing of the ‘‘donut hole’’ in
Medicare Part D, will have a positive impact on our business. Additionally, recent advances in
technology are allowing patients to seek medical advice and receive diagnostic counseling in a virtual
environment, shifting certain healthcare services away from the traditional doctor’s office into virtual
clinics, providing additional opportunities for our retail pharmacy operations to better serve our
customers.
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