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Rite Aid cuts 2Q loss, but sales dip
September 24th, 2009
CAMP HILL, Pa. – Rite Aid Corp. posted a smaller loss for its fiscal 2010 second quarter amid a slight decline in total revenue and same-store sales.
The drug store chain on Thursday reported a net loss of $116 million, or 14 cents per diluted share, for the 13 weeks ended August 29, down from a loss of $222 million, or 27 cents per diluted share, a year earlier.
That beat Wall Street analysts' average forecast of a 16-cents-per-share loss and was on the low end of their estimates, which ranged from a loss of 13 cents to 19 cents per share, according to Thomson Financial.
Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) came in at $216.5 million, or 3.4% of revenue, for the fiscal 2010 second quarter compared with $219.9 million, or 3.4% of revenue, in the prior-year period.
Rite Aid said that a 135-basis-point improvement in selling, general and administrative expenses (SG&A) offset most of the sales and gross margin decrease and, as previously disclosed, adjusted EBITDA reflected a $4.6 million reclassification of accounts receivable securitization fees as interest expense to make it comparable to the current period.
On the revenue side, total sales for the fiscal 2010 second quarter were $6.3 billion, down 2.7% from $6.5 billion a year earlier. Rite Aid attributed the decline mainly to store closings and a decrease in front-end same-store sales.
Same-store sales for the quarter fell 1.1%, reflecting a 4.9% drop in the front end and a 0.8% gain in the pharmacy, where the number of prescriptions filled rose 1.4%. The company noted that a 274-basis-point increase in generic dispensing negatively impacted sales.
Excluding the acquired Brooks Eckerd stores, same-store sales declined 0.6%, with the front end decreasing 4.9% and the pharmacy increasing 2%, Rite Aid said.
During the second quarter, Rite Aid opened three stores, relocated 10 stores, remodeled one store and closed 16 stores. As of August 29, the retailer operated 4,812 stores.
The company added that its liquidity is strong, with $822.3 million of availability on its credit and accounts receivable facilities as of the end of the quarter.
"We again made significant progress on many of our key initiatives, reducing both SG&A and controlling inventory, and finished the quarter with strong liquidity," Rite Aid chairman and chief executive officer Mary Sammons said in a statement. "We increased the number of prescriptions filled, but our pharmacy results were negatively impacted by additional pressure on pharmacy margins. A more discount-driven customer buying more items on sale continued to have a negative impact on front-end results."
Rite Aid lowered its guidance for fiscal 2010, noting that ongoing weak economic trends and high unemployment will squeeze front-end sales and pressure pharmacy gross margins.
The company now projects a fiscal 2010 net loss of $390 million to $615 million, or 48 cents to 74 cents per diluted share. When reporting first-quarter results, the retailer had lowered its full-year projection to a net loss of $265 million to $490 million, or 33 cents to 59 cents per diluted share, to reflect increased interest expenses from a refinancing plan.
Rite Aid expects total fiscal 2010 revenue to come in at $25.7 billion to $26.2 billion, with same-store sales ranging from a 1% decrease to a 1% increase. That's down slightly from the company's previous forecast of $26.3 billion to $26.7 billion in total sales and same-store results improving 0.5% to 2.5%
"Because we expect these negative trends and a tough economy to continue throughout the second half of the year, we have lowered our outlook for fiscal 2010," Sammons commented. "We're focusing on growing profitable sales and will continue to control expenses. We expect liquidity to remain strong."