CAMP HILL, Pa. — Despite declined revenue, Rite Aid Corp. narrowed its loss for its fiscal 2011 third quarter and came in ahead of Wall Street’s forecast.
The drug store chain said Thursday that for the 13-week third quarter ended Nov. 27, sales fell 2.4% to $6.2 billion from $6.4 billion a year earlier. The company attributed the decrease to a decline in pharmacy same-store sales and store closings.
Overall same-store sales in the quarter dipped 1.3% year over year, reflecting flat results in the front end and a 1.9% decline in the pharmacy. Rite Aid noted that pharmacy same-store sales included a 242-basis-point negative impact from new generic drug introductions. The number of prescriptions filled in comparable stores fell 1.7%, reflecting a 1.3% negative impact from the lower incidence of cough, cold and flu, according to the company.
On the earnings side, Rite Aid posted a third-quarter net loss of $79.1 million, or 9 cents per diluted share, a slight improvement from a loss of $83.9 million, or 10 cents per diluted share, in the prior-year period.
Rite Aid’s earnings per share for the quarter came in ahead of the average analyst estimate of a 13 cents-per-share loss, according to Thomson Financial. Analyst forecasts ranged from a low of a 16 cents-per-share loss to a high of a 9 cents-per-share loss.
Lower lease termination and impairment charges, lower LIFO expense, lower interest and securitization expense and a reduction in depreciation and amortization helped offset the impact of the decline in adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) on the net loss in the quarter, Rite Aikd reported.
Adjusted EBITDA in the third quarter was $212.5 million, or 3.4% of revenue, versus $254.2 million, or 4% of revenue, a year earlier. Rite Aid said adjusted EBITDA was negatively impacted by $12 million due to fewer cough, cold and flu prescriptions filled year over year and a $29.5 million increase in workers’ compensation and general liability self-insurance expense. The increase in self-insurance expense stems from a reduction of reserves recorded in last year’s third quarter because of favorable claims experience, the company added.
"The quarter was below our expectations. While the lack of cough, cold and flu had a significant impact on our results, the good news is that our front-end sales began to turn around during the quarter and our team continued to do a good job of controlling cost," Rite Aid president and chief executive officer John Standley said in a statement. "We are pleased to see that our loyalty program wellness + continues to gain traction with customers and patients."
Rite Aid said that in the third quarter it opened one new drug store, relocated 11 stores, remodeled 15 stores and closed 17 stores. Stores in operation at the end of the quarter totaled 4,731. Also during the quarter, Rite Aid added the Save-A-Lot discount, limited-assortment grocery concept to 10 of its drug stores in the Greenville, S.C., market under a co-branding agreement with the Supervalu Inc. supermarket chain.
Looking ahead, Rite Aid Rite Aid scaled back its fiscal 2011 guidance for sales and adjusted EBITDA and project a larger net loss for the year.
"Based on our third-quarter results and our current view that same-stores sales in the fourth quarter will be softer than we had expected, we have lowered our guidance for the full year," Standley stated.
The company reported that revenue is now expected to be $25 billion to $25.2 billion, with same-store sales down 1.5% to 0.9%. The net loss is projected at $655 million, or 74 cents per diluted share, to $525 million, or 60 cents per diluted share. Analysts forecast a loss of 57 cents per share, on average, for fiscal 2011, with projections for the loss ranging from 47 cents to 64 cents.
