Rite Aid Q1 revenues decline 4.9% to $7.8 billion

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Rite Aid Q1 revenues decline 4.9% to $7.8 billion

By Michael Johnsen - 06/29/2017

CAMP HILL, Pa. — Rite Aid on Thursday reported revenues of $7.8 billion, a decrease of 4.9%. Net loss totaled $75.3 million, or $0.07 per diluted share, and adjusted net loss was $52.4 million, or $0.05 per diluted share.

Retail Pharmacy Segment revenues were $6.4 billion and decreased 4.9% compared to the prior year period primarily as a result of a decrease in same-store sales and reimbursement rates. Revenues in the company's Pharmacy Services Segment were $1.5 billion and decreased 5.6% compared to the prior year period, due to an election to participate in fewer Medicare Part D regions, which caused a decrease in covered lives at Envision Insurance Company.

Same-store sales for the quarter decreased 3.9% over the prior year, consisting of a 5% decrease in pharmacy sales and a 1.5% decrease in front-end sales. Pharmacy sales included an approximate 222 basis point negative impact from new generic introductions. The number of prescriptions filled in same stores, adjusted to 30-day equivalents, decreased 1.1% over the prior year period due in part, to exclusion from certain pharmacy networks that Rite Aid participated in the prior year. Prescription sales accounted for 67.9% of total drug store sales, and third party prescription revenue was 98.3% of pharmacy sales.

Rite Aid also announced that it has entered into an asset purchase agreement with Walgreens Boots Alliance, whereby WBA will acquire 2,186 stores, related distribution assets and inventory from Rite Aid for an all-cash purchase price of $5.175 billion, on a cash-free, debt-free basis. Under the terms of the agreement, Rite Aid has the option to purchase generic drugs that are sourced through an affiliate of WBA at cost, substantially equivalent to Walgreens for a period of 10 years.  

Rite Aid expects to use a substantial majority of the net proceeds from the transaction to repay existing indebtedness, significantly reducing Rite Aid's leverage levels. Rite Aid also expects that the federal tax gain on the sale of the assets will be largely offset by its net operating loss carryforwards, resulting in a minimal cash tax payment on this transaction.  

Following the completion of the transaction, Rite Aid will continue to operate EnvisionRx, its pharmacy benefit manager, RediClinic and Health Dialog and leverage the capabilities of these subsidiaries to deliver a higher level of care in the communities it serves.

"I would like to thank our entire Rite Aid team for their extraordinary efforts during this process and their tremendous focus on taking great care of our customers and patients," stated John Standley, chairman and CEO Rite Aid. "We have an outstanding team of associates and, with their continued support, we will work together to deliver a great customer experience, improve our business and deliver value to all of our stakeholders."

In the first quarter, the company opened one store, relocated four stores, remodeled 67 stores and expanded one store, bringing the total number of wellness stores chainwide to 2,482. The company closed 14 stores, resulting in a total store count of 4,523 at the end of the first quarter.