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Rite Aid's 4Q results miss Wall Street's forecast
March 31st, 2010
CAMP HILL, Pa. – Store closings and weak same-store sales led to a revenue decline for Rite Aid Corp. in its fiscal 2010 fourth quarter, with the drug store chain also falling short of Wall Street's earnings estimate.
The company said Wednesday that total sales for the fourth quarter ended Feb. 27 fell 3.6% to $6.5 billion from $6.7 billion a year earlier.
Same-store sales for the 13-week quarter decreased 2.4%, reflecting a 2.6% decline in the front end and a 2.4% drop in the pharmacy. Pharmacy sales included a 202-basis-point negative impact from new generic drug introductions, according to Rite Aid. The number of prescriptions filled in same stores dipped 1.7% over the prior-year period.
On the earnings side, Rite Aid posted a net loss of $208.4 million, or 24 cents per diluted share, in the fiscal 2010 fourth quarter. The average analyst estimate for the period was a net loss of 19 cents per share, with the loss projections ranging from a low of 24 cents to a high of 10 cents, Thomson Financial reported.
A year ago, Rite Aid had a fourth-quarter net loss of $2.3 billion, or $2.67 per diluted share, which included significant noncash charges related to goodwill impairment, store impairment and an additional tax valuation allowance against deferred tax assets. Excluding the noncash charges, the fiscal 2009 fourth-quarter net loss was $116.9 million, or 14 cents per diluted share.
Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) came in at $205.1 million, or 3.2% of revenue, for the fiscal 2010 fourth quarter, compared with $270.5 million, or 4% of revenue, for the like period last year, Rite Aid said. The company noted that adjusted EBITDA for the fiscal 2009 quarter reflects a $9.1 million reclassification of accounts receivable securitization fees as interest expense to make it comparable to the current period.
Besides the negative impact from lower sales and less profit on new generics, Rite Aid cited a significant reduction in pharmacy reimbursement rates. The company also said an improvement in front-end margin and good control of selling, general and administrative (SG&A) expenses weren't enough to offset the decline in pharmacy margin.
"It was a difficult quarter with continued weak consumer demand, a weaker cough, cold and flu season than last year and continued pressure on pharmacy reimbursement," Rite Aid chairman and chief executive officer Mary Sammons said in a statement. "But our team did a good job of improving front-end margins and holding tight on expenses. Thanks to our working capital initiatives, we moved into the new fiscal year with a strong liquidity position."
For the fiscal 2010 year ended February 27, Rite Aid reported revenue of $25.7 billion, down 2.4% from $26.3 billion a year earlier. Fiscal 2010 same-store sales fell 0.9%, including a 2.9% decrease in the front end and a 0.1% gain in the pharmacy, with the number of prescriptions filled in same stores rising 0.8%.
Rite Aid attributed the full-year revenue decline mainly to having 121 fewer stores and the decrease in same-store sales.
The net loss for fiscal 2010 was $506.7 million, or 59 cents per diluted share, below the average analyst estimate of a net loss of 54 cents per share, according to Thomson Financial. Analysts' loss projections ranged from a low of 59 cents per share to a high of 45 cents per share.
In fiscal 2009, Rite Aid had a net loss of $2.9 billion, or $3.49 per diluted share, which included significant noncash charges related to goodwill impairment, store impairment and an additional tax valuation allowance against deferred tax assets. Without those charges, the 2009 net loss would have been $640 million, or 79 cents per diluted share, the company said.
Adjusted EBITDA for fiscal 2010 totaled $925 million, or 3.6% of revenue, versus $991.1 million, or 3.8% of revenue, a year ago. As in the quarterly report, the adjusted EBITDA for the prior year reflects a $26.1 million reclassification of accounts receivable securitization fees as interest expense.
For fiscal 2010, Rite Aid opened 17 new stores, relocated 41 stores, remodeled eight stores and closed 138 stores. The retailer had 4,780 stores in operation at the end of the year.
Looking ahead at fiscal 2011, Rite Aid said results will reflect the impact of a continued weak economy with high unemployment and the company's investment in its new customer loyalty program.
The retailer projects fiscal 2011 sales of $25.2 billion and $25.6 billion, which would be on the low end of analyst estimates, and same-store sales ranging from a year-over-year decrease of 1% to a gain of 1%.
The net loss for fiscal 2011 is expected to be between $355 million and $570 million, or a loss per diluted share of 41 cents to 65 cents, according to Rite Aid. The average analyst estimate is for a net loss of 36 cents per share, with the loss ranging from a low of 50 cents to a high of 24 cents.
Rite Aid projects its adjusted EBITDA for fiscal 2011 to come in at $875 million and $975 million.