Rite Aid reports Q1 results

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Rite Aid reports Q1 results

By Antoinette Alexander - 06/27/2018
Rite Aid has reported its first-quarter 2019 results, posting net income of $214.4 million but still swinging to a $41.7 million loss from continuing operations. Rite Aid's adjusted net loss was $11.5 million, and its adjusted EBITDA from continuing operations of $147.3 million — roughly 2% of the company's $5.4 billion in revenue for the quarter.

Rite Aid’s net income for the first quarter included an after-tax gain of approximately $268.6 million relating to the sale of 281 stores and related assets to Walgreens Boots Alliance. The sale of the three distribution centers and related inventory is expected to occur after Sept. 1, Rite Aid said. Retail pharmacy segment revenues were $3.9 billion and decreased 1.9% compared with the prior year period due to store closures and a decline in same-store sales. Revenues in the Pharmacy Services Segment were $1.5 billion, an increase of 2% compared with the prior year period, which the company said was due to an increase in Medicare Part D membership.

The company’s net loss — higher than the 36 million loss from continuing operations it posted in the year-ago period, was largely attributed to higher interest expense, higher lease termination and impairment charges, and higher transaction costs, and was partially offset by an increase in adjusted EBITDA.

Same-store sales from retail pharmacy continuing operations for the quarter decreased 0.7% compared with the prior year, consisting of a 1.8% decrease in front-end sales and 0.1% decrease in pharmacy sales. Pharmacy sales included an approximate 133-basis-point negative impact from new generic introductions. The number of prescriptions filled in same stores, adjusted to 30-day equivalents, decreased 1.5 % compared with the prior year period, due primarily to exclusion from certain pharmacy networks that Rite Aid participated in during the prior year. Prescription sales from continuing operations accounted for 66.4 percent of total drugstore sales.

“In the first quarter, we continued making progress in building momentum for key areas of our business, including improvement in pharmacy gross margin and the successful relaunch of our customer loyalty program wellness+ rewards," Rite Aid president Kermit Crawford said.

The results come shortly after Rite Aid issued a letter to its shareholders outlining the benefits of its proposed merger with Boise, Idaho-based Albertsons and encouraging them to approve it. Rite Aid chairman and CEO John Standley noted Wednesday that though the company is delivering on its own, the merger presents a unique opportunity for growth.

“As we continue to focus on taking care of our customers and executing our standalone strategy, we have the opportunity to further accelerate our strategy by combining with Albertsons to create a truly differentiated leader in food, health and wellness,” Standley said. “This combination will enhance our scale and density to better compete in existing markets, give us access to new markets, significantly improve our omnichannel capabilities and create the opportunity to achieve substantial cost synergies and revenue growth, all of which will strengthen our financial profile and position us to deliver compelling long-term value for customers and shareholders.”

Crawford noted that the merger will expand the company’s reach into new geographic areas and add to its offerings. “As we continue to implement our new strategy, we're excited about the unique opportunity we have to significantly grow our business through a combination with Albertsons, which will give us access to nearly 1,800 additional pharmacy counters, innovative and healthy new own brand products like O Organics and Open Nature as well as provide new levers for growth for our EnvisionRxOptions PBM and RediClinic.”

Even as it preps for a merger with Albertsons, Rite Aid provided an outlook for fiscal 2019, which does not reflect the proposed merger’s impact. It projected sales of be between $21.7 billion and $22.1 billion in fiscal 2019 with same-store sales expected to be flat to an increase of 1 percent over fiscal 2018.

Adjusted EBITDA is expected to be between $615 million and $675 million. Net loss is expected to be between $40 million and $95 million. Adjusted net income per share is expected to be between 2 cents and 6 cents.