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PHILADELPHIA — Rite Aid reported a net loss of $241.3 million, or $4.39 per share, for its fourth quarter, compared to a net loss of $389.1 million, or $7.18 per share in the year-ago period. The adjusted net loss of $68.2 million, or $1.24 per share, was wider than the 78 cents per share expected by analysts.
The company’s quarterly revenue of $6.09 billion topped Wall Street’s projected $5.6 million.
Elizabeth ‘Busy’ Burr
“Our fourth quarter results were at the higher end of our guidance and above consensus, driven by encouraging results in retail pharmacy and year over year improvement for the quarter at Elixir,” said Elizabeth “Busy” Burr, interim chief executive officer. “We are making progress in our turnaround program to drive performance acceleration that we expect will help mitigate fiscal 2024 challenges related to reimbursement, COVID headwinds and enrollment at Elixir, and to drive meaningful adjusted EBITDA growth in fiscal 2025 and 2026.”
Adjusted EBITDA for the period ended March 4 was $128.6 million, or 2.1 percent of revenues. For the full fiscal year, the company reported a net loss of $749.9 million, or $13.71 loss per share, adjusted net loss of $174.3 million, or $3.19 loss per share, and adjusted EBITDA of $429.2 million, or 1.8 percent of revenues. The fiscal 2023 fourth quarter and full year results benefited from an extra week.
Revenues for the quarter were up .03% from $6.07 billion in the prior year’s quarter, largely due to an extra week and increases in both comparable front-end sales and non-COVID prescriptions, partially offset by a reduction in revenue from COVID vaccines and testing, store closures and the loss of commercial clients at Elixir.
Revenues for the fiscal year were $24.1 billion compared to $24.6 billion in the prior year, largely due to a reduction in revenue from COVID vaccines and testing, store closures and the loss of commercial clients at Elixir. These items were partially offset by an extra week in the fourth quarter and increases in both comparable front-end sales and non-COVID prescriptions.
The decrease in the quarterly net loss is primarily due to a reduction in goodwill impairment charges, a gain on the company’s repurchase of certain bonds at a discount, a reduction in facility exit and impairment charges, an increase in adjusted EBITDA, and a gain on sale of assets resulting from sale leasebacks and script file sales from store closures. These items were partially offset by an increase in restructuring charges and an increase in interest expense.
Net loss for the fiscal year ended March 4, 2023, was $749.9 million, or $13.71 loss per share, compared to last year’s net loss of $538.5 million, or $9.96 loss per share. The increase in net loss is due primarily to increased goodwill and intangible asset impairment charges for the impairment of goodwill related to the Pharmacy Services Segment, a decrease in adjusted EBITDA, higher restructuring charges, higher interest expense, and increased facility exit and impairment charges. These items were partially offset by a gain on the repurchase of certain bonds at a discount and a gain on sale of assets resulting from sale leasebacks and script file sales from store closures.
Retail Pharmacy Segment revenues for the quarter increased 8.2 percent over the prior year period driven by an extra week and an increase in both acute and maintenance prescriptions, partially offset by a reduction in COVID vaccine and testing revenue as well as store closures. Same store sales for the fourth quarter increased 8.9 percent over the prior year period, consisting of an 11.4 percent increase in pharmacy sales and a 2.3 percent increase in front-end sales. Front-end same store sales, excluding cigarettes and tobacco products, increased 2.8 percent. The number of prescriptions filled in same stores, adjusted to 30-day equivalents, increased 5.2 percent over the prior year period. Total same store prescriptions, excluding COVID immunizations and tests, increased 9.7 percent, with same store maintenance prescriptions increasing 8.2 percent and other same store acute prescriptions increasing 14.9 percent. Prescription sales accounted for 71.5 percent of total drugstore sales. Total store count at the end of the fourth quarter was 2,309.
Retail Pharmacy Segment adjusted EBITDA was $101.2 million, or 2.1 percent of revenues, for the fourth quarter compared to last year’s fourth quarter adjusted EBITDA of $102.4 million, or 2.3 percent of revenues. The decline was due to an increase in adjusted EBITDA selling, general and administrative (SG&A) expenses of $2.1 million, partially offset by increased adjusted EBITDA gross profit. SG&A expenses were negatively impacted by an extra week in the fourth quarter, partially offset by lower payroll, occupancy, and other operating costs due to cost control initiatives and store closures. Gross profit benefited from higher sales due primarily to an extra week and an increase in prescriptions sold, as well as a reduction in markdowns, partially offset by the decline in COVID vaccinations and testing.
Pharmacy Services Segment revenues were $1.3 billion for the quarter, a decrease of 20.8 percent compared to the prior year quarter. For the fiscal year ended March 4, 2023, Pharmacy Services Segment revenues were $6.5 billion, a decrease of 10.9 percent compared to the prior year. The decrease in revenues was primarily the result of a decrease in Elixir Individual Part D Insurance membership due to a change in the Company’s pricing structure and loss of commercial clients, partially offset by increased utilization and higher cost drugs.
Pharmacy Services Segment adjusted EBITDA was $27.4 million, or 2.0 percent of revenues, for the fourth quarter compared to last year’s adjusted EBITDA of $3.7 million, or 0.2 percent of revenues. The increase resulted from improved procurement economics, improved medical loss ratio at Elixir insurance and reductions in SG&A expense, partially offset by the lower membership. The membership mix is more favorable, as it reflects focus on the commercial target market, while reducing individual insurance Part D membership.
The company’s outlook for fiscal 2024 assumes the negative impacts of reimbursement rate declines, a reduction in demand for COVID vaccines and testing and a decrease in revenues at Elixir resulting from the reduction in lives effective January 1, 2023.
Rite Aid expects adjusted EBITDA to be higher in the second half of fiscal 2024 due to timing of its performance acceleration and cost reduction initiatives. It expects those initiatives to drive adjusted EBITDA growth in fiscal 2025 and 2026.
Total revenues for fiscal 2024 are expected to be between $21.7 billion and $22.1 billion. Retail Pharmacy Segment revenue is expected to be between $17.8 billion and $18.1 billion and Pharmacy Services Segment revenue is expected to be between $3.9 billion and $4.0 billion, net of any intercompany revenues to the Retail Pharmacy Segment.
The company forecasts a full year net loss of between $439 million and $466 million.
Adjusted EBITDA is expected to be between $340 million and $370 million. Retail Pharmacy Segment Adjusted EBITDA is expected to be between $240 million and $260 million and Pharmacy Services Segment Adjusted EBITDA is expected to be between $100 million and $110 million.
Adjusted net loss per share is expected to be between $(4.44) and $(4.93).
The company said it expects fiscal 2024 headwinds to be partially offset by benefits from its performance acceleration program, which it expects to drive:
- Mid-single digit increases in both comparable store sales and non-COVID comparable prescriptions
- Generic purchasing efficiencies
- Reductions in indirect spend
- Higher Adjusted EBITDA margins at Elixir due to favorable member mix and continued improvement in procurement economics
Capital expenditures are expected to be approximately $225 million, with a focus on investments in digital capabilities, technology, prescription file purchases and distribution center automation.
