Rite Aid posts Q1 loss as Rx sales see solid gains

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Rite Aid posts Q1 loss as Rx sales see solid gains

Rite Aid on Wednesday reported its first-quarter results for fiscal year 2020, posting a net loss of $99.3 million, even as same-store sales increased 1.4% and revenue in its pharmacy services segment increased 1.5% over the prior-year period.

Though much of the net loss was related to higher restructuring-related costs, decreased adjusted EBITDA and higher income tax expense, leadership at the Camp Hill, Pa.-based retailer also identified continued reimbursement pressures on the pharmacy side as a hindrance.

"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 retail pharmacy and Medicare Part D revenue growth in the pharmacy services segment," CEO John Standley said.

For the quarter, the company posted revenue of $5.37 billion. Rite Aid’s retail pharmacy segment saw revenue of $3.86 billion — a decrease of 0.8% from the first quarter of fiscal year 2019. The same-store sales increase was attributed to a 2.3% increase in pharmacy sales, which occurred alongside a 0.3% decrease in front-end sales. Excluding tobacco products and cigarettes, same-store sales increased by 0.3%. Despite growth in pharmacy sales — which comprised 66.9% of the chain’s drug store sales — Rite Aid noted that they were impacted by roughly 207 basis points by new generic introductions, which offset the 2.7% year-over-year growth in the number of prescriptions filled, adjusted to 30-day equivalents.

“Our continued success with clinical pharmacy services and other script growth initiatives helped drive a strong 3.7% increase in same-store prescription count, which exceeded our expectations and is our best script count performance in four years,” Standley told analysts on a conference call discussing the results.

Pharmacy services segment revenue was $1.57 billion, an increase that the company attributed to growth in Medicare Part D revenue.

Moving forward, Rite Aid affirmed its outlook for FY 2020, projecting between $21.5 and $21.9 billion, with same-store sales growth expected to be between 0% and 1% over FY 2019 and a net loss of between $170 million and $220 million.

On the conference call, Standley noted that the company’s supply deal with McKesson, improvements in generic purchasing, revenue growth and the effects of its recent cost-reduction efforts will help drive these results. He also highlighted the company’s recently announced partnership with Adobe Experience Cloud as driving enhancements in its digital, marketing and personalization efforts. He also highlighted a partnership with UNFI, which will introduce its Wild Harvest brand into Rite Aid stores in Q2. The brand’s organic and natural items fall in line with Rite Aid’s increased focus on its wellness transformation.

Standley also noted that the company’s digital business grew 115% in Q1. Additionally, the company’s partnership with Amazon to install Amazon Lockers in its stores continues, with more than 300 stores equipped with the pickup option and plans to outfit 900 stores with the lockers by the end of Q2.

Standley said the company’s board has identified candidates for his successor as CEO, and currently is in the process of interviewing and selecting candidates.

“Recognizing that the search is the board's highest priority, the board is making significant progress towards selecting a strong leader that will help Rite Aid be successful,” Standley said.