Rite Aid posts Q4, full-year results
Rite Aid’s pharmacy segment saw an 8.2% increase versus the same period last year. An extra week in the fourth quarter and an increase in prescriptions were the main causes.
“Our fourth quarter results were at the higher end of our guidance and above consensus, driven by encouraging results in retail pharmacy and year over year improvement for the quarter at Elixir,” said Elizabeth “Busy” Burr, interim CEO of Rite Aid, as the company reported its Q4 and fiscal year results.
Burr added, “We are making progress in our turnaround program to drive performance acceleration that we expect will help mitigate fiscal 2024 challenges related to reimbursement, COVID headwinds and enrollment at Elixir, and to drive meaningful adjusted EBITDA growth in fiscal 2025 and 2026.”
For the fourth quarter, Rite Aid reported a net loss of $241.3 million, or $4.39 loss per share, adjusted net loss of $68.2 million, or $1.24 loss per share, and adjusted EBITDA of $128.6 million, or 2.1% of revenues.
For the full year, the company reported a net loss of $749.9 million, or $13.71 loss per share, adjusted net loss of $174.3 million, or $3.19 loss per share, and adjusted EBITDA of $429.2 million, or 1.8% of revenues. The fiscal 2023 fourth quarter and full-year results benefited from an extra week in fiscal 2023, Rite Aid said.
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Rite Aid's revenues for the quarter were $6.09 billion compared to revenues of $6.07 billion in the prior year’s quarter, largely due to an extra week in the fourth quarter and increases in both comparable front-end sales and non-COVID prescriptions. The increase was partially offset by a reduction in revenue from COVID vaccines and testing, store closures and the loss of commercial clients at Elixir, Rite Aid said.
Revenues for the fiscal year ended, March 4, 2023, were $24.1 billion compared to $24.6 billion in the prior year, largely due to a reduction in revenue from COVID vaccines and testing, store closures and the loss of commercial clients at Elixir. These items were partially offset by an extra week in the fourth quarter and increases in both comparable front-end sales and non-COVID prescriptions, the company said.
Fourth quarter net loss was $241.3 million, or $4.39 per share, compared to last year’s fourth quarter net loss of $389.1 million, or $7.18 per share. The decrease in net loss is primarily due to a reduction in goodwill impairment charges, a gain on the company’s repurchase of certain bonds at a discount, a reduction in facility exit and impairment charges, an increase in adjusted EBITDA and a gain on sale of assets resulting from sale leasebacks and script file sales from store closures. These items were partially offset by an increase in restructuring charges and an increase in interest expense, the company said.
Net loss for the fiscal year ended March 4, 2023, was $749.9 million, or $13.71 loss per share, compared to last year’s net loss of $538.5 million, or $9.96 loss per share. The increase in net loss is due primarily to increased goodwill and intangible asset impairment charges for the impairment of goodwill related to the pharmacy services segment, a decrease in adjusted EBITDA, higher restructuring charges, higher interest expense and increased facility exit and impairment charges. These items were partially offset by a gain on the repurchase of certain bonds at a discount and a gain on sale of assets resulting from sale leasebacks and script file sales from store closures, Rite Aid said.
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Rite Aid’s retail pharmacy segment revenues increased 8.2% over the prior year quarter driven by an extra week in the fourth quarter and an increase in both acute and maintenance prescriptions. The increase was partially offset by a reduction in COVID vaccine and testing revenue as well as store closures, the company noted.
Same store sales for the quarter increased 8.9% over the prior year period, consisting of an 11.4% increase in pharmacy sales and a 2.3% increase in front-end sales. Front-end same store sales, excluding cigarettes and tobacco products, increased 2.8%.
The number of prescriptions filled in same stores, adjusted to 30-day equivalents, increased 5.2% over the prior year period. Total same store prescriptions, excluding COVID immunizations and tests, increased 9.7%, with same store maintenance prescriptions increasing 8.2% and other same store acute prescriptions increasing 14.9%. Prescription sales accounted for 71.5% of total drugstore sales. Total store count at the end of the fourth quarter was 2,309.
For the fiscal year ended March 4, 2023, Rite Aid’s retail pharmacy segment revenues increased 1.7% over the prior year. The increase in revenues is due primarily to an extra week in the fourth quarter and an increase in both acute and maintenance prescriptions. The increase was partially offset by a reduction in COVID vaccine and testing revenue as well as store closures.
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Same store sales for the year increased 6.9% over the prior year, consisting of a 9.1% increase in pharmacy sales and a 1.1% increase in front-end sales. Front-end same store sales, excluding cigarettes and tobacco products, increased 1.6%.
The number of prescriptions filled in same stores, adjusted to 30-day equivalents, increased 3.5% over the prior year period. Total same store prescriptions, excluding COVID immunizations and tests, increased 6.9%, with same store maintenance prescriptions increasing 5.9% and other same store acute prescriptions increasing 10.1%. Prescription sales accounted for 71.2% of total drugstore sales.
Rite Aid’s retail pharmacy segment adjusted EBITDA was $101.2 million, or 2.1% of revenues, for the fourth quarter compared to last year’s fourth quarter adjusted EBITDA of $102.4 million, or 2.3% of revenues. The decline in adjusted EBITDA was due to an increase in adjusted EBITDA selling, general and administrative expenses of $2.1 million. The decline was partially offset by increased adjusted EBITDA gross profit. SG&A expenses were negatively impacted by an extra week in the fourth quarter, partially offset by lower payroll, occupancy and other operating costs due to cost control initiatives and store closures. Gross profit benefited from higher sales due primarily to an extra week and an increase in prescriptions sold, as well as a reduction in markdowns, partially offset by the decline in COVID vaccinations and testing, the company said.
For the fiscal year ended March 4, 2023, retail pharmacy segment adjusted EBITDA was $288.1 million, or 1.6% of revenues, compared to $392.6 million, or 2.2% of revenues, for the prior year. The decrease in adjusted EBITDA was due to decreased gross profit, partially offset by a decrease in SG&A expenses of $164.5 million. Gross profit was negatively impacted by the decline in COVID vaccinations and testing, partially offset by the increase in prescriptions sold. SG&A expenses benefitted from lower payroll, occupancy and other operating costs due to store closures and cost control initiatives, partially offset by an extra week.
Rite Aid's pharmacy services segment revenues were $1.3 billion for the quarter, a decrease of 20.8% compared to the prior year quarter. For the fiscal year ended March 4, 2023, pharmacy services segment revenues were $6.5 billion, a decrease of 10.9% compared to the prior year. The decrease in revenues was primarily the result of a decrease in Elixir Individual Part D Insurance membership due to a change in the company’s pricing structure and loss of commercial clients, partially offset by increased utilization and higher cost drugs.
Pharmacy services segment adjusted EBITDA was $27.4 million, or 2% of revenues, for the fourth quarter compared to last year’s fourth quarter adjusted EBITDA of $3.7 million, or .2% of revenues. The increase in adjusted EBITDA resulted from improved procurement economics, improved medical loss ratio at Elixir insurance and reductions in SG&A expense, partially offset by the lower membership, as mentioned above. “Our membership mix is more favorable, as it reflects focus on our commercial target market, while reducing Individual Insurance Part D membership,” the company said.
For the fiscal year ended March 4, 2023, pharmacy services segment adjusted EBITDA was $141.1 million, or 2.2% of revenues, compared to prior year adjusted EBITDA of $113.3 million, or 1.6% of revenues. The increase in Adjusted EBITDA resulted from improved procurement economics and reductions in SG&A expense.
“Our outlook for fiscal 2024 assumes the negative impacts of reimbursement rate declines, a reduction in demand for COVID vaccines and testing and a decrease in revenues at Elixir resulting from the reduction in lives effective Jan. 1, 2023,” Rite Aid said, adding, “We expect these headwinds to be partially offset by benefits from our performance acceleration program, which we expect: to drive mid-single digit increases in both comparable store sales and non-COVID comparable prescriptions; generic purchasing efficiencies; reductions in indirect spend; and higher adjusted EBITDA margins at Elixir due to favorable member mix and continued improvement in procurement economics."
Rite Aid expects its adjusted EBITDA to be higher in the second half of fiscal 2024 due to timing of its performance acceleration and cost reduction initiatives. Rite Aid said it also expects those initiatives to drive adjusted EBITDA growth in fiscal 2025 and 2026.
Rite Aid’s total revenues are expected to be between $21.7 billion and $22.1 billion in fiscal 2024. Retail pharmacy segment revenue is expected to be between $17.8 billion and $18.1 billion and pharmacy services segment revenue is expected to be between $3.9 billion and $4.0 billion, net of any intercompany revenues to the retail pharmacy segment.
Net loss is expected to be between $439 million and $466 million.
Adjusted EBITDA is expected to be between $340 million and $370 million. Rite Aid’s retail pharmacy segment adjusted EBITDA is expected to be between $240 million and $260 million and pharmacy services segment adjusted EBITDA is expected to be between $100 million and $110 million.
Rite Aid’s adjusted net loss per share is expected to be between $4.44 and $4.93.
Capital expenditures are expected to be approximately $225 million, with a focus on investments in digital capabilities, technology, prescription file purchases and distribution center automation.