Rite Aid and Walgreen see different economies

Walgreens sales hit an annual high after reporting their quarterly
results in the sale economy Rite Aid blamed poor performance
on the economy. (AP Photo/Lisa Poole)

It may appear that Rite Aid and Walgreen have their stores in close proximity to each other, but they apparently are in different economies. This summation is made after reading their statements for the last quarter.

During the last quarter Rite Aid saw flat same store sales while Walgreen experienced a 2.4 percent increase. As with any financial statement there are explanations given by the company. Often these statements are nothing more than lame excuses for poor performance.

Rite Aid blames their flat sales on the economy. It seems a plausible excuse as we are continually barraged with reports of rising unemployment, lowered spending, and other negativity. However if this is true, we would see the same at Walgreens, which clearly we do not.

Walgreens provides insight in their statement. They were able to grow their pharmacy sales by filling 9.1 percent more prescriptions while pharmacy comps at Rite-Aid were down. Coupled with an expense reduction program, Walgreens was able to post a net income while economy-whining Rite Aid chalked up a loss.

Instead of whining about the economy, Walgreen’s took proactive steps to prepare for tightened discretionary dollars. Their merchandise mix was adjusted by eliminated SKUs and focusing on value-priced products. Consumer response was positive, as indicated by sales and profit results.

As I wrote in “You’re Not Running a Vineyard, So Stop Your Whining”, the economy is not an excuse for poor results -- it is an excuse for poor management. The economy is hardly ever stable -- it has as many ups and downs as a roller coaster. Instead of blaming the economy, management needs to take a look at the mechanisms they have in place to prepare for pending recessions and to be at the forefront of a rebound.