Rite Aid’s strong Q3 sees revenue growth, increased market share
Rite Aid’s fiscal third quarter showed double-digit gains in revenue, as well as growing market share in both the front end and pharmacy.
The Camp Hill, Pa.-based retailer reported revenue of $6.12 billion, up 12% year over year, with net income of $4.3 million, compared with $52.3 million a year ago. Rite Aid attributed this to a $55.7 million gain on debt retirements in the prior-year period, as well as a decrease in adjusted EBITDA, which were offset by lower restructuring costs and a higher gain on sale of assets related to the sale-leaseback of its Perryman, Md., distribution center.
“We are pleased with our third-quarter performance as we continue to grow our business and achieve major physical and digital milestones through our RxEvolution strategy,” said Heyward Donigan, president and chief executive officer, Rite Aid. “We officially launched our new brand and logo, made substantial progress in evolving our merchandise mix to an assortment that best supports whole health, refreshed over 700 store exteriors, opened the first three new Store of the Future prototypes and began the integration of our two legacy PBMs. On the digital side, we launched a completely modernized Rite Aid online experience and mobile app and are set to launch our new member portal at Elixir.”
Within Rite Aid’s retail pharmacy segment, revenue was up 5% year over year, with same-store sales increasing by 4.3% over the prior-year quarter, comprised of a 6.1% increase in pharmacy sales and a 0.7% decrease in front-end sales. Excluding tobacco and cigarettes, front-end same-store sales were up 0.3%, boosted by growth in immunity, first aid and paper products and offset by declines in cough-cold and flu, as well as soft Halloween candy sales. In terms of dollars and unit sales, the company said that both its pharmacy and front end gained market share, as scripts grew by 3.1% on a year-over-year basis. A 28% increase in flu immunizations helped buoy the pharmacy against a 19% decrease in acute scripts related to cough-cold and flu and an overall 1.9% decline in acute script volume.
“Our teams are working hard to serve our customers during these challenging times. We have administered over one million COVID-19 tests and will be partnering with the CDC to help administer COVID-19 vaccines in our communities,” Donigan said. “I am so proud of our 50,000 associates and the strategic progress we’re making in our journey to revolutionize our industry and elevate our role as an indispensable healthcare provider.”
On the pharmacy services side, the newly rebranded Elixir saw revenue of $2.1 billion, a 29.2% increase over the previous year’s Q3, which Rite Aid attributed to growth among its Medicare Part D members, which grew by 252,000 members. The revenue increase was offset by lower EBITDA as a percent of revenue. The segment also benefited from payroll reductions and lower overall indirect spend, offset by higher Medicare Part D drug costs and selling, general and administrative expense related to growth in Medicare Part D membership. For fiscal 2022, Rite Aid said it expects its Medicare Part D membership to decrease, but expects those members to be more profitable.
“We are accelerating the key initiatives that support our strategy, and we will continue to deliver the operational excellence needed to achieve strong results as we generate cash flow, reduce debt and improve our leverage ratio,” Donigan said.
Looking forward, the Rite Aid is narrowing its fiscal 2021 guidance, based on efforts to drive retail sales growth, offset by a soft cough-cold and flu season; a reduction in Medicare Part D membership starting Jan. 1, 2020; expense control in its segments, offset by additional retail operating costs related to growing COVID-19 cases in its markets; and improvements in pharmacy network management at Elixir. Given these factors, Rite Aid said it estimates revenue will be between $23.9 billion and $24.2 billion, with a net loss expected to be between $114 million and $89 million. It expects same-store sales to grow by between 3.5% and 4.5% over fiscal 2020.