For the Athena US Equity portfolio, Covestor model manager Athena Invest looks for twenty US stocks that are held by top equity managers. This portfolio’s current top holdings include Rite Aid (RAD), Sirius XM Radio (SIRI), and Hurco Companies (HURC) (as of end of day 3/16/11).
On March 10, the RAD position was newly added. to the portfolio. Rite Aid is a retail drugstore chain in the United States, operating in 31 states with 4,780 stores.
In December, RAD announced disappointing third quarter of fiscal 2011 results:
“The quarter was below our expectations. While the lack of cough, cold and flu had a significant impact on our results, the good news is that our front end sales began to turn around during the quarter and our team continued to do a good job of controlling costs.
…
“Based on our third quarter results and our current view that same stores sales in the fourth quarter will be softer than we had expected, we have lowered our guidance for the full year,” Standley said.
Brad Thomas at Seeking Alpha wrote about a strategy for RAD to delever its balance sheet and improve its results:
Currently Rite Aid operates 4,780 stores in 31 States. The majority of the stores are located in the northeast and the southeast with a fractional (853/4780) 17.8% located in six (6) western States (CA, CO, NV, OR, UT and WA). Given Rite Aid’s massive leverage ($6.4 billion), it appears that the company could provide some valuable de-leveraging by selling off approximately 853 of its west coast stores. In addition, Rite Aid owns eleven (11) distribution centers totaling approximately 5.5 million square feet. Since the company is paying its creditors around 8% in interest, it appears that a significant amount off long term debt could be further reduced by selling the assets and leasing them back to third party sponsors (i.e. sale leaseback facility). Both above mentioned strategies could provide Rite Aid with a significant reduction in its burdensome $ 6.2 billion in debt.
RAD closed down 1.89% on 3/16.
Sources:
“Rite Aid Reports Third Quarter Fiscal 2011 Results” Rite Aid, 12/16/10. http://www.riteaid.com/company/investors/quarterly_results_details.jsf?itemNumber=1384
“A Real Estate Strategy for Rite Aid” Brad Thomas. SeekingAlpha, 12/23/10. https://seekingalpha.com/article/243333-a-real-estate-strategy-for-rite-aid
