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Rite Aid reduces net loss in second quarter
September 20th, 2012
CAMP HILL, Pa. – Rite Aid Corp. trimmed its net loss, beating Wall Street's forecast, but saw sales dip for its fiscal 2013 second quarter.
Rite Aid said Thursday that revenue for the 13-week quarter ended Sept. 1 fell 0.6% to $6.2 billion from $6.3 billion a year earlier. The company attributed the decrease mainly to a decline in pharmacy same-store sales and store closings.
Same-store sales for the second quarter were flat, reflecting a 1.4% gain in the front end and a 0.7% decrease in the pharmacy. Rite Aid noted that comparable pharmacy sales included an a 750-basis-point negative impact from generic drug introductions.
Prescriptions filled in comparable stores grew 4%, including the benefit of additional prescriptions resulting from the Walgreens/Express Scripts contract dispute. Prescription sales accounted for 67.5% of total drug store sales in the quarter.
The net loss for the second quarter was $38.8 million, or 5 cents per diluted share, improving from a net loss of $92.3 million, or 11 cents per diluted share, a year ago.
The average analyst estimate was for a net loss of 7 cents per share in the second quarter, with the per-share forecast ranging from a low of a 10-cent loss to a high of a 5-cent loss, according to Thomson Financial.
Rite Aid said the smaller net loss resulted from an increase in adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) and decreases in LIFO, store closing and impairment and depreciation and amortization charges.
Adjusted EBITDA rose to $218.7 million, or 3.5% of revenue, in the second quarter, from $184.3 million, or 2.9% of revenue, in the prior-year period. Rite Aid attribted the improved adjusted EBITDA to increases in front-end sales and script count as well as an improvement in pharmacy gross margin resulting from new generic drugs.
"We are pleased with our second-quarter results as we continue to make significant progress in our turnaround efforts," Rite Aid chairman, president and chief executive officer John Standley said in a statement. "We have now increased adjusted EBITDA and same-store prescription count for seven consecutive quarters, thanks to chainwide efforts to execute key sales initiatives, operate more efficiently and provide a superior customer experience.
"While the wave of new generic medications is negatively impacting same-store sales, it’s having a positive impact on pharmacy gross margin," he noted.
“We are working to continue this momentum as we focus on communicating the value of our wellness+ loyalty program, converting additional stores to our innovative new wellness format and promoting the convenience of getting a flu shot at your neighborhood Rite Aid pharmacy," Standley added.
In the second quarter, the company relocated four stores, remodeled 147 stores and closed nine stores. Completed wellness store remodels at the end of the quarter totaled 570. As of Sept. 1, Rite Aid operated 4,643 stores overall.
For the 26-week first half ended Sept. 1, revenue was virtually flat, edging up to about $12.70 billion from $12.66 billion. The net loss shrank to about $66.9 million, or 8 cents per share, from $155.3 million, or 18 cents per share, in the year-ago period.
Looking ahead to fiscal 2013, Rite Aid narrowed its net loss projection to between $69 million and $196 million, or a loss per diluted share of 9 cents to 23 cents, compared with its previous guidance of $103 million to $248 million, or 13 cents to 29 cents per diluted share.
Analysts, on average, forecast a net loss of 15 cents per share for fiscal 2013, with per-share projections running from a low of a 21-cent net loss to a high of an 8-cent net loss, according to Thomson Financial.
Rite Aid also updated its fiscal 2013 revenue guidance, forecasting sales of $25.1 billion to $25.4 billion and same-store sales ranging from a decrease of 1% to an increase of 0.25%. The drug chain said the reduction in its revenue and same-store sales guidance stems from a projected 650-basis-point negative impact of new generic introductions on comparable pharmacy sales and continued reimbursement rate pressure.