Rite Aid (NYSE: RAD) is the third-largest drugstore chain in the United States, with over 4,800 stores in 31 states. The company makes most of its money from the sale of prescription drugs, but it also sells non-medical items such as cosmetics and greeting cards. The company should benefit from the tailwind of an aging U.S. population; people over 54 use drugs at much higher rates than their younger counterparts. Rite Aid, however, faces increasing competition from non-traditional drug retailers. Most notable among these is Wal-Mart, which recently began selling over 360 generic drugs for only $4 per subscription. This is significantly less than RAD's prices and may put pressure on the company's drug margins. It also has implications for the company's higher margin front-store (beauty products, snacks, etc.) sales, which are heavily dependent on RAD's ability to cross-sell customers who come in for prescriptions.

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