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CAMP HILL, Pa. — Rite Aid Corp. Thursday reported better-than-expected third quarter sales and earnings. The company also narrowed its fiscal 2020 earnings forecast while maintaining its revenue guidance. The results lifted the retailer’s shares more than 20% to over $10.
Heyward Donigan
For the quarter ended November 30, adjusted net income was $29.1 million, or 54 cents per share, up 93% from the year-ago period. Revenues were $5.46 billion, up from $5.45 billion.
Net income from continuing operations was $52.3 million, or 98 cents per share, Adjusted EBITDA from continuing operations was $158.1 million, or 2.9% of revenues.
“Our team delivered a strong quarter that provides us with momentum as we prepare to roll out our long-term strategy and position Rite Aid Corporation as an innovative leader in our industry,” said CEO Heyward Donigan. “Adjusted EBITDA grew in our retail business due to tight expense control and prescription count growth in our retail pharmacies, which benefited from solid growth in immunizations. At the same time, we saw improved pharmacy network management at EnvisionRxOptions.
“While we are pleased with these results, we have important work ahead of us to put our company on a path to long-term sustainable growth. We will soon reveal our comprehensive strategy that revitalizes Rite Aid retail pharmacies as fresh and relevant, leveraging the trust and expertise of our pharmacists in meeting the unique health and wellbeing needs of our communities. We are also investing in the expansion and integration of EnvisionRxOptions, particularly its services, technologies and clinical offerings. This will provide us scale to deliver lower total cost of care, an enhanced client experience and heightened consumer engagement. We are making great progress, and we are excited to share more details at our upcoming Analyst Day on March 16.”
Retail Pharmacy segment revenues were $3.91 billion, down 1.7% from last year due to a reduction in store count. Revenues in the Pharmacy Services segment were $1.61 billion, up 5.7% due to an increase in Medicare Part D membership.
Same-store sales decreased 0.1%, the result of a 0.1% increase in pharmacy sales and a 0.5% decrease in front-end sales. Front-end same store sales, excluding cigarettes and tobacco products, advanced 1%. Pharmacy sales were negatively impacted by approximately 331 basis points as a result of new generic introductions. The number of prescriptions filled in same stores, adjusted to 30-day equivalents, increased 2.8% over the prior year period resulting primarily from the company’s continued emphasis on driving clinical services, including immunizations. Prescription sales accounted for 67.7% of total drugstore sales.
Net income from continuing operations was $52.3 million or 98 cents per share compared to last year’s third quarter net loss from continuing operations of $17.3 million or 33 cents per share. The increase in net income was due primarily to a $55.7 million gain on debt retirements and an increase in adjusted EBITDA.
Adjusted EBITDA from continuing operations was $158.1 million or 2.9% of revenues for the third quarter compared to last year’s $142.8 million or 2.6% of revenues, an increase of $15.3 million. Retail Pharmacy segment adjusted EBITDA from continuing operations increased $7.4 million due to strong labor and benefits expense control. These improvements were partially offset by a reduction in gross profit and a reduction in Transition Service Agreement fee income from Walgreens Boots Alliance. The Pharmacy Services segment adjusted EBITDA increased $7.9 million due to improvements in pharmacy network management.
The updated outlook for fiscal 2020 assumes continued prescription count growth, improvements in generic drug costs and strong SG&A expense control, offset by a decline in prescription reimbursement rates. The guidance for EnvisionRxOptions assumes sustained improvements in pharmacy network management and initial results of SG&A reduction, benefits integration and restructuring initiatives.
The company now expects revenues to be between $21.5 billion and $21.9 billion in fiscal 2020 with same-store sales expected to range from flat to an increase of 1%.
The net loss is expected to be between $174 million and $204 million. Adjusted EBITDA is expected to be between $515 million and $545 million. Adjusted net income per share is expected to be between 13 and 55 cents, a narrowing of the earlier projection of zero to 56 cents. Capital expenditures are expected to be approximately $230 million.
