Rite Aid posts 23.1% Q1 revenue gain to $8.2 billion

CAMP HILL, Pa. - Rite Aid on Thursday reported revenues of $8.2 billion, a net earnings loss of $4.6 million, or $0.00 per diluted share, adjusted net income of $14.5 million, or $0.01 per diluted share and adjusted EBITDA of $286 million, or 3.5% of revenues for its first fiscal quarter ended May 28, 2016.

"Our results for the first quarter reflect strong performance in our Pharmacy Services Segment and our front-end business as well as good overall expense control," stated John Standley, chairman and CEO Rite Aid. "Our challenge was pharmacy reimbursement rate pressure, which we were unable to offset largely due to drug purchasing efficiencies that did not meet our expectations.

While drug cost reductions will continue to be short of Rite Aid's expectations in the near term, the company anticipates improvements over the second half of the fiscal year, Standley said. "As we work to meet this challenge, we remain focused on executing our highly successful sales initiatives like wellness+ with Plenti and the Wellness store program while also making strategic investments for growth and delivering a consistently outstanding customer experience."

Quarterly revenues of $8.2 billion represented an increase of $1.5 billion, or 23.1%. Retail Pharmacy Segment revenues were $6.7 billion and increased 0.4% compared to the prior year period primarily as a result of an increase in same store sales. Revenues in the company's Pharmacy Services Segment, which was acquired on June 24, 2015, were $1.6 billion.

Same-store sales for the quarter increased 0.4% over the prior year, consisting of a 0.1% increase in pharmacy sales and a 1.2% increase in front-end sales. Pharmacy sales included an approximate 198 basis point negative impact from new generic introductions. The number of prescriptions filled in same stores increased 0.6% over the prior year period. Prescription sales accounted for 68.9% of total drugstore sales, and third party prescription revenue was 98% of pharmacy sales.

Adjusted EBITDA was $286 million or 3.5% of revenues for the first quarter compared to $299.3 million or 4.5% of revenues for the same period last year. The decline in adjusted EBITDA is due to a decrease of $54.4 million in the Retail Pharmacy Segment driven by lower pharmacy margin due to lower reimbursement rates that were not offset by purchasing efficiencies and script count growth. An improvement in front end gross profit offset inflationary increases in selling, general and administrative expenses. The decline in Retail Pharmacy Segment adjusted EBITDA was partially offset by $41.2 million of Pharmacy Services Segment adjusted EBITDA.

In the first quarter, the company opened four stores, relocated four stores, and remodeled 79 stores, bringing the total number of wellness stores chainwide to 2,126. The company also acquired one store and closed six stores, resulting in a total store count of 4,560 at the end of the first quarter. The company also opened two clinics in the first quarter, bringing the total to 80.