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Rite Aid Q2 results accompanied by governance changes

Rite Aid on Thursday reported its operating results for its second quarter, and separately announced governance changes. As the company reported $5.4 billion in revenue — though still swung to a loss of $325.5 million — it also nominated three independent directors to its board and separated the roles of chairman and CEO, naming Bruce Bodaken chairman, effective Oct. 30.

Rite Aid said the nominated directors — Robert Knowling, Jr., Louis Miramontes and Arun Nayar — would stand for nomination at the company’s annual shareholders meeting, set for Oct. 30. They will replace current directors David Jessick, Myrtle Potter and Frank Savage, who won’t stand for re-election, Rite Aid said.

"These changes will significantly strengthen and enhance the Board's governance oversight and reflect our commitment to aligning Rite Aid's interests with those of stockholders," said Mr. Bodaken. "Since terminating the transaction with Albertsons, we have engaged directly with many of our largest stockholders. Based on the valuable insight and input we have received, we are accelerating our effort to refresh the Board. We are pleased to welcome Bob, Lou and Arun, and believe their fresh perspectives will be significant assets as we continue to oversee the development and implementation of our strategy to best position Rite Aid to create long-term value for stockholders."

The board changes and earnings results come as the company is working to bolster its standalone strategy, according to current chairman and CEO John Standley. For the quarter, the company’s revenue marked an increase over the previous-year period, with the retail pharmacy segment contribution $3.9 billion and pharmacy services driving $1.6 billion in revenue —increases of 0.2% and 4.6%, respectively, over the prior-year period. Adjusted net loss was $7.9 million.

Rite Aid’s same-store retail pharmacy sales rose 1% for the quarter, driven largely by a 1.6% increase in pharmacy sales — a figure that includes the 107-basis-point impact of new generic introductions. For the quarter, same-store prescriptions filled, adjusted to 30-day equivalents, increased 1.1%, with prescription sales comprising 66.4% fo the company’s total drug store sales.

"During the quarter, we have been hard at work accelerating our standalone strategy to capitalize on key opportunities to grow our business," Standley said. "These efforts helped us drive significant improvement in front-end and pharmacy comparable stores sales and exceed our plans for script count growth. With our trusted brand of health and wellness, highly popular customer loyalty program, innovative Wellness format and expanding offering of health and wellness services, we have a strong foundation for growth."

The company said its net loss was largely related to a $282.6 million charge, net of tax, for the impairment of intangible assets related to the pharmacy services segment. Net income was buoyed by a $325 million merger termination fee received from Walgreens Boots Alliance.

Adjusted EBITDA was $148.6 million, or roughly 2.7% of revenues — an increase over the prior-year period’s $136.9 million in adjusted EBITDA.

Rite Aid finished the quarter with 2,526 stores, having closed eight and opened one. Additionally, the company remodeled 33 stores, bringing the total number of stores with the wellness format to 1,726

"While we have important work ahead of us, we also have full confidence in our strategy, our team and our company to succeed in building significant momentum for the future as we continue to work to meet the evolving needs of our customers and create value for our shareholders," Standley said.
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