Rite Aid reports Q4, full-year results

Despite the persistent headwinds of the pandemic, Rite Aid saw increased revenue in Q4 and its fiscal year, which ended Feb. 26, 2022.

The retailer saw revenues increase 2.5% and 2.2% for the quarter and full-year, respectively. The increase was driven by growth in the retail pharmacy segment. This was partially offset by a decline in the pharmacy services segment, the company said.

Revenue for the full-year increased from $525 million to $24.6 billion. For the fourth quarter, the company reported net loss from continuing operations of $389.1 million, or $7.18 loss per share, adjusted net loss from continuing operations of $88.6 million, or $1.63 loss per share, and adjusted EBITDA from continuing operations of $106.1 million, or 1.8% of revenues.

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“We exceeded our 2022 plan amid continuing challenges of the COVID-19 pandemic. As we look forward to the year ahead, we are ready and energized to compete in a new post-pandemic normal,” said Heyward Donigan, president and CEO of Rite Aid. “We demonstrated the important role that pharmacists play in the everyday health of our customers and are well positioned to grow in a trillion-dollar pharmacy market through our continued leadership as a full-service pharmacy company.” 

Fourth-quarter net loss from continuing operations was $389.1 million, or $7.18 per share, compared to last year’s fourth-quarter net loss from continuing operations of $18.5 million, or 34 cents per share. Rite Aid attributed the increase in net loss to a current year charge of $229 million for the impairment of goodwill related to the pharmacy services segment. Other variance drivers include higher facility exit and impairment charges driven by the company’s store closure decisions, a gain on sale of assets in the prior year fourth quarter resulting from the sale-leasebacks of stores and distribution centers, a gain on the acquisition of Bartell Drugs in the prior year fourth quarter and a LIFO charge in the current quarter compared to a LIFO credit in the prior-year fourth quarter. These items were partially offset by an increase in adjusted EBITDA, the company said.

Net loss from continuing operations for the fiscal year was $538.5 million, or $9.96 loss per share, compared to last year’s net loss of $100.1 million, or $1.87 loss per share. The increase in net loss is due primarily to goodwill impairment related to the pharmacy services segment, higher facility exit and impairment charges, a LIFO charge in the current year compared to a LIFO credit in the prior year, higher litigation settlements and a gain on the acquisition of Bartell Drugs in the prior year. These items were partially offset by an increase in adjusted EBITDA and lower restructuring-related costs, the company said.

Revenues from the retail pharmacy segment increased 7.8% over the prior-year quarter, driven by an increase in same-store sales. Same-store sales from continuing operations for the fourth quarter increased 8.3% over the prior-year period, consisting of a 10.7% increase in pharmacy sales and a 2.7% increase in front-end sales. Front-end same-store sales, excluding cigarettes and tobacco products, increased by 3.2%.

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The number of prescriptions filled in the same stores, adjusted to 30-day equivalents, increased 8.7% over the prior-year period. In addition to the benefit from 3.3 million COVID-19 vaccinations, maintenance prescriptions increased by 1% while other acute prescriptions increased 9% on a same-store basis when excluding COVID-19 vaccinations. Prescription sales from continuing operations accounted for 70.1% of total drugstore sales. The total store count at the end of the fourth quarter was 2,450.

Retail pharmacy segment revenues for the fiscal year increased 6.9% over the prior year, driven by an increase in same-store sales and the inclusion of Bartell’s results. Same-store sales from continuing operations for the year increased 4.5% over the prior year, consisting of a 7.9% increase in pharmacy sales. This was partially offset by a 3.3% decrease in front-end sales. Front-end same-store sales, excluding cigarettes and tobacco products, decreased by 2.8%.

The number of prescriptions filled in the same stores, adjusted to 30-day equivalents, increased 8.7% over the prior-year period. In addition to the benefit from over 14 million COVID-19 vaccinations, maintenance prescriptions increased 1.8% while other acute prescriptions increased 2.3% on a same-store basis when excluding COVID-19 vaccinations. Prescription sales from continuing operations accounted for 70% of total drugstore sales.

Gross profit benefited from higher pharmacy same-store sales, including immunizations. This was partially offset by pharmacy reimbursement rate pressures and an increase in front-end gross profit resulting from higher front-end same-store sales and a reduction in markdowns. SG&A expenses were negatively impacted by incremental payroll costs to support COVID immunizations, increases in bonus expense for store and field, increases in worker's compensation costs and cycling the benefit from the prior year change to modernize the company’s associate PTO plans, the company said.

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Rite Aid’s revenues in its pharmacy services segment were $1.7 billion for the quarter, a decrease of 9.4% compared to the prior-year quarter. For the fiscal year, pharmacy services segment revenues were $7.3 billion, a decrease of 8.1% compared to the prior year. The decrease in revenues was primarily the result of a planned decrease in Elixir Insurance membership and a previously announced client loss due to industry consolidation, the company noted.

The company expects total revenues to be between $23.1 billion and $23.5 billion in fiscal 2023. Retail pharmacy segment revenue is expected to be between $17.7 billion and $18 billion and revenue from its pharmacy services segment is expected to be between $5.4 billion and $5.5 billion (net of any intercompany revenues to the retail pharmacy segment).

Net loss is expected to be between $167 million and $210 million. Adjusted net loss per share is expected to be between 53 cents and $1.06. Capital expenditures are expected to be approximately $250 million, with a focus on investments in digital capabilities, technology, prescription file purchases, distribution center automation and store remodels. The company said it expects to generate positive free cash flow in fiscal 2023.