Rite Aid Corp. beat Wall Street analyst estimates with a narrower loss in its fiscal 2010 third quarter, although sales tailed off slightly.

Rite Aid, third quarter, net loss, sales, revenue, Mary Sammons, drug store, pharmacy, Russell Redman

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Rite Aid shrinks 3Q loss, but revenue slips

December 17th, 2009

CAMP HILL, Pa. – Rite Aid Corp. beat Wall Street analyst estimates with a narrower loss in its fiscal 2010 third quarter, although sales tailed off slightly.

The drug store chain on Thursday posted a net loss of $83.9 million, or 10 cents per diluted share, for the 13 weeks ended November 28, compared with a loss of $243.1 million, or 30 cents per diluted share, a year earlier.

That bested the average analyst estimate of 18 cents per share for Rite Aid's fiscal 2010 third quarter, according to Thomson Financial. The retailer's per-share earnings also finished well above analysts' high estimate of 16 cents.

Rite Aid attributed the smaller loss to lower charges stemming from store closings and impairment, lower LIFO expense and the absence of a tax valuation allowance.

Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) for the third quarter came in at $254.2 million, down from $259.6 million in the prior-year period. Improvement in selling, general and administrative expenses (SG&A) offset most of the decrease, the company said.

Third-quarter revenue totaled $6.35 billion, down 1.8% from $6.37 billion a year earlier, mainly because of store closings and a decline in front-end business, according to Rite Aid.

Same-store sales, meanwhile, fell 0.5% in the quarter, reflecting a 2.5% decrease in the front end and a 0.4% gain in the pharmacy. Rite Aid said the number of prescriptions filled rose 1.5%, and a 227-basis-point increase in generic dispensing negatively impacted pharmacy sales.

During the third quarter, Rite Aid opened three stores, relocated 13 stores, remodeled three stores and closed 14 stores. The chain operated 4,801 stores as of November 28.

Rite Aid also noted that its liquidity remained strong, with $903.2 million of availability from its credit facility and invested cash. The retailer also said it has no major debt maturities until September 2012. In October, Rite Aid refinanced its first- and second-lien accounts receivable securitization facilities due September 2010, completing the refinancing of all of its September 2010 debt maturities.

"Our results demonstrate the significant progress we've made to strengthen our company since last year's third quarter," chairman and chief executive officer Mary Sammons said in a statement. "Liquidity at the end of the quarter more than doubled, and we've refinanced all of our 2010 debt maturities to give more time for our growth initiatives to work.

"Congratulations to our team for the great job they did once again growing prescriptions, reducing expenses and controlling inventory, which helped offset difficult front-end sales in this tough retail economy and continued pressure on pharmacy margins," she added.

For the 2010 fiscal year, Rite Aid narrowed its earnings forecast to a loss of $413 million to $542 million, or 50 cents to 66 cents per diluted share. When reporting second-quarter results in September, the company had lowered its guidance to a loss of between $390 million and $615 million, or 48 cents to 74 cents per diluted share.

Analysts project Rite Aid's fiscal 2010 earnings at 57 cents per share, forecasting a high of 50 cents and a low of 61 cents, according to Thomson Financial.

Rite Aid expects fiscal 2010 sales to total between $25.6 billion and $25.9 billion, which would be down slightly from revenue of nearly $26.3 billion in fiscal 2009. Same-store sales for fiscal 2010 are slated to range from a decrease of 1% to an increase of 0.5% over fiscal 2009, the company said.