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CAMP HILL, Pa. — Rite Aid Corp. on Wednesday reported operating results for its first fiscal quarter ended June 1, 2019.
The company reported net loss from continuing operations of $99.3 million, or $1.88 per share; adjusted net loss from continuing operations of $7.5 million, or $0.14 per share, and adjusted EBITDA from continuing operations of $110.3 million, or 2.1% of revenues.
“While first quarter results did not meet our expectations due to prescription reimbursement rate pressure in the retail pharmacy segment and margin compression in the pharmacy services segment, we are pleased with the improvements in our top-line growth and operating efficiency in the retail pharmacy segment and Medicare Part D revenue growth in the pharmacy services segment,” said Rite Aid chief executive officer John Standley. “Looking forward, enhancements made to the McKesson supply agreement, generic purchasing improvements, revenue growth and the benefits of actions we have taken to reduce costs should drive improved results in both segments for the remainder of the year. We expect to meet our full-year guidance. In addition, through our ‘Path to the Future’ transformation initiative, we are identifying significant opportunities to drive further growth and operating efficiency in fiscal 2021, with a focus on reducing our reliance on traditional pharmacy reimbursement rate models.”
Revenues from continuing operations for the quarter were $5.37 billion compared to revenues from continuing operations of $5.39 billion in the prior year’s quarter. Revenues in the retail pharmacy segment were $3.86 billion and decreased 0.8% compared to the prior year period due to a reduction in store count, partially offset by an increase in same store sales. In the pharmacy services segment, revenues were $1.57 billion, an increase of 1.5% compared to the prior year period, which was due to an increase in Medicare Part D revenue.
Same store sales from retail pharmacy continuing operations for the first quarter increased 1.4% over the prior year, the company reported, consisting of a 2.3% increase in pharmacy sales and a 0.3% decrease in front-end sales. Front-end same store sales — excluding cigarettes and tobacco products — increased 0.3%. Pharmacy sales were negatively impacted by approximately 207 basis points as a result of new generic introductions. The number of prescriptions filled in same stores, adjusted to 30-day equivalents, increased 3.7% over the prior year period resulting primarily from the company’s initiatives to drive medication adherence and script growth. Prescription sales from continuing operations accounted for 66.9% of total drugstore sales.
Net loss from continuing operations was $99.3 million, or $1.88 per share, compared to last year’s first quarter net loss from continuing operations of $41.7 million, or $0.79 per share. The increase in net loss, according to the company, was due primarily to higher restructuring-related costs, a decrease in adjusted EBITDA, and higher income tax expense, partially offset by a reduction in depreciation and amortization expense and lease termination and impairment charges.
Adjusted EBITDA from continuing operations was $110.3 million, or 2.1% of revenues for the first quarter, compared to adjusted EBITDA from continuing operations of $138.0 million, or 2.6% of revenues for the same period last year, a decrease of $27.7 million. The retail pharmacy segment adjusted EBITDA from continuing operations decreased $20.1 million compared to the prior year due primarily to weaker pharmacy gross profit caused by prescription reimbursement rate pressure that the company was not able to fully offset with both generic drug purchasing efficiencies and increases in prescriptions filled in comparable stores.
The reduction in reimbursement rates was partially caused by a $12.5 million charge for a change in estimated exposure for a retroactive billing from a state Medicaid agency. These negative variances were partially offset by an improvement in adjusted EBITDA selling, general and administrative expense of $23.7 million. This improvement was driven by lower salaries and benefit expense relating to the recent corporate restructuring that more than offset the reduction in transition services agreement fee income from Walgreens Boots Alliance and strong labor and expense control at the stores.
The pharmacy services segment adjusted EBITDA decreased $7.5 million over the prior year due to margin compression in the company’s commercial business and other operating investments to support current year and future growth.
In the first quarter, the company remodeled 27 stores, bringing the total number of wellness stores chain-wide to 1,787. Additionally, the company opened 1 store and closed 4 stores, resulting in a total store count of 2,466 at the end of the first quarter.
Rite Aid is confirming its fiscal 2020 outlook.
