• by Sarah Mahoney  @mahoney_sarah, June 24, 2014

Rite Aid took to swanky Beverly Hills to show off its latest concept of wellness retailing, unveiling a remodeled store that it says represents the drug store’s future. The updated store includes larger departments for pharmacy, which now has a private consulting room; beauty; over-the-counter medicines and first aid. It has added a café and patio area, serving coffee, tea, baked goods, sandwiches and ice cream. 

The company, which first launched the Wellness concept back in 2011, has also broadened merchandise offerings centered around health, such as gluten-free and organic foods, and home fitness equipment. It also introduced a dedicated beauty advisor, to help customers navigate its expanded offerings.

The innovations are part of the company’s response to challenges in “front end,” or non-pharmacy, sales -- where it faces intense competition from such chains as Walgreens and CVS. 

"The Beverly Hills store is a great example of how we are aggressively evolving the Wellness store format to identify concepts that perform well and can be broadly applied to future remodels and test new concepts, like our Fresh Day Café,” says Rite Aid President and Chief Operating Officer Ken Martindale in the company’s release. “Going forward, we will continue to push the envelope in leveraging our Wellness stores to launch and expand innovative merchandising concepts, with the ultimate goal of delivering a more personal and engaging customer experience."  

So far, 1,300 stores are under the Wellness format, with another 450 stores set for conversion by the end of fiscal 2015. The company has 4,600 stores in 31 states.

In its most recently quarterly results, the Camp Hill, Pa.-based retailer reported sharply lower profits of $41.4 million, down from $89.7 million in the first quarter of the prior year, squeezed by higher-than-expected drug rates and reimbursement rate pressure. Sales rose from $6.3 billion to $6.5 billion, with same-store results climbing 3.1%. Front-end, or non-pharmacy, sales, however, were flat, and the continued remodeling is expected to spark growth.

Separately, Walgreens, the largest retail drug chain and a Rite Aid competitor, cited similar issues in its just-released quarterly earnings. Walgreens says its adjusted net earnings increased 9% to $883 million, and third-quarter sales advanced 5.9% to $19.4 billion. But front-end sales in same-store sales added just 2.2%, and traffic actually declined almost 1%.