the biggest reason for the profit shortfall is what now appears to be overly rosy guidance for cost-saving benefits tied to Rite Aid's recent deal with generic distribution giant McKesson.
That deal transferred the company's responsibility for buying and distributing generic drugs to stores from Rite Aid to McKesson. When the deal was announced, Rite Aid argued that McKesson's bigger buying power and sophisticated distribution network (allowing for daily shipments direct to stores) would lower purchasing costs and inventory.
Unfortunately, that argument fell short this past quarter given that the company's cost of goods sold totaled 72.1%, up about a percent from a year ago.
You know, I work with McKesson myself, and I've always kinda liked them. They've always treated me fair, they have a lot of resources available for an indy out there in the big, bad, drugstore marketplace, they even gave me a free plant when I opened my account that's still alive.
I don't like McKesson anymore though. Because according to this they kinda fucked my former employer.
Which means I now LOVE them!!
I'll probably kiss my McKesson driver Monday and he'll have no idea why.