(RAD) Rite Aid Corporation – Bear of the Day

October 20th, 2009

Management at Rite Aid Corporation (RAD) was executing a turnaround strategy centered on increasing the profitability of the existing store base. However, the acquisition of Brooks Eckerd prior to a convincing turnaround in profitability has increased the debt burden and interest expense.

Moreover, Wal-Mart’s foray into the retail generic drug market has pressured the company’s pharmacy margin.

Given the weakness of front-end sales and management’s continual lowering of EPS guidance (for larger net losses), the stock’s rating remains Underperform.

Zacks Investment Research
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