Rite Aid's Q1 sees revenue growth fueled by front end

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Rite Aid's Q1 sees revenue growth fueled by front end

By David Salazar - 06/25/2020

Rite Aid’s first quarter of fiscal 2021 saw double-digit revenue growth fueled by its retail pharmacy and pharmacy services arms, which led to it posting a substantially smaller net loss than it did a year ago. Revenue for the Camp Hill, Pa.-based retailer totaled $6.03 billion — up from $5.37 billion a year ago — and its net loss totaled $72.7 million for the quarter ended May 30, down from the $99.3 million net loss it posted in Q1 of its previous fiscal year. 

"I couldn't be more proud of how our teams have worked tirelessly to support and care for our communities during these unprecedented times, while continuing to push forward in achieving our vision for the future," said Heyward Donigan, president and CEO of Rite Aid. "Our retail pharmacy teams responded to the COVID-19 crisis by taking immediate action to maintain our supply chain and stay in stock, enhance our digital experience, quickly implement safety measures, keep our stores open and provide outstanding service, all of which helped us drive double-digit front-end sales growth and gain retail market share. In the pharmacy services segment, our full leadership team is now in place, and our team has made excellent progress in integrating the assets of EnvisionRxOptions, soon to be renamed Elixir, as we continue the integration with Rite Aid.”

In Rite Aid’s retail pharmacy segment, revenue grew by 6.7% over Q1 of fiscal 2020, coming in at $4.12 billion. Same-store sales were up 6.65 over the prior-year period with same-store front-end sales up 16% excluding cigarettes and tobacco products, which the company said was driven by growth in general cleaning products, sanitizers, wipes, paper products, liquor, OTC and summer seasonal items, and accompanied by growth in front-end market share. Pharmacy sales were up 2.2% and Rite Aid saw a 0.4% increase in prescriptions filled, particularly maintenance medication fills supported by medication therapy management and home delivery. The company did note that the pandemic has brought with it a 14.8% decline in the number of acute prescriptions being filled, as outpatient medical visits and eletive surgical procedures have been curtailed. Prescription sales comprised 64.2% of the total store sales. 

"There are certainly challenges brought about by COVID-19, including the decline in acute prescriptions and increased costs incurred to assure the safety of our associates and customers,” said Rite Aid CEO Heyward Donigan. “No matter the challenge, we can execute our strategy and deliver day-to-day operational excellence in the face of a pandemic. I am amazed by the passion and spirit of our more than 50,000 associates, who have come to work every day driven by a desire to help customers stay healthy and demonstrating the essential role of pharmacy in our communities. Thanks to their hard work, the fundamentals of our business are strong, and we are right on track with the launch of our new RxEvolution strategy. I am excited to continue this important work as we look to become a leading mid-market PBM, unlock the value of our pharmacists and revitalize our retail and digital experiences."

Rite Aid’s pharmacy services segment saw revenue increase by 262% over the prior period, bringing in $1.98 billion — growth the company attributed to an increase in Medicare Part D membership. 

Throughout the COVID-19 crisis, Rite Aid said it has taken various steps to remain a resource for shoppers and benefit its communities. Besides rolling out 97COVID-19 testing sites in partnership with the federal government, the company provided Hero Pay from March 15 through May 16 and offered various employee pay efforts. It also committed $6 million through the Rite Aid Foundation toward healthcare providers and first responders and hired roughly 6,000 full- and part-time employees to support its store and distribution center teams. Rite Aid also grew its contact-less capabilities in-store for prescription pickup and payment, expanded its home delivery to include front-end items through Instacart, and rolled out Rite Aid Virtual care for patients with need for telehealth services. 

 The company also reported continued increases in comparable-store front-end sales, which it said are up 7.2% over the prior-year period for the first three weeks of June, excluding tobacco and cigarettes. Same-store prescription counts have increased 80 basis points over the prior year for the same time period, which Rite Aid attributed to a lessening impact of acute prescriptions, which have seen an 11.7% decline in June. 

Rite Aid highlighted its cost-management efforts, noting that it had eliminated 254 corporate office positions in the retail pharmacy and pharmacy services segment. It also noted efforts around reducing shrink, advertising, rent, travel and call center expenses, all of which will result in savings of more than $40 million in the fiscal year that was not originally included in the company’s guidance. The $7 million severance costs related to the layoffs will be classified as a restructuring expense, Rite Aid said. 

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