Rite Aid's fiscal 2Q loss shrinks, revenue slips
An increased number of prescriptions filled and rising sales at the front end of its stores helped Rite Aid Corp. report a narrower fiscal second quarter loss..
The Camp Hill, Pa., company also said Thursday that generic drug introductions and reimbursement rate pressure spurred it to reduce its fiscal 2013 revenue forecast. Rite Aid also lowered the range of its expected loss.
For the three months ended Sept. 1, Rite Aid lost $41.4 million, or 5 cents per share, after paying preferred dividends, in the quarter that ended Sept. 1. That compares with a loss of $94.7 million, or 11 cents per share, in last year's quarter.
Revenue dipped to $6.23 billion from $6.27 billion.
Analysts surveyed by FactSet expected, on average, a loss of 7 cents per share, on $6.25 billion in revenue.
Rite Aid said revenue at stores open at least a year was flat in the quarter, with drop of less than 1 percent in pharmacy sales countered by a 1.4 percent increase in the front end, or rest of the store. Revenue at stores open at least a year is considered a key indicator of a retailer's health, because it leaves out results from locations that have opened or closed in the last year and measures growth at continuing locations.
The drugstore chain's prescription count increased 4 percent compared with last year's quarter, helped in part by a split between rival drugstore chain Walgreen Co. and pharmacy benefits manger Express Scripts Inc. Express Scripts had paid Walgreen to fill prescriptions, but a contract between the companies expired in December and they didn't agree on a new deal until this summer. The split meant many Express Scripts customers had to find new drugstores for their prescriptions.
Even though prescriptions increased, pharmacy revenue fell due to the introduction of generic drugs. Popular drugs like the cholesterol fighter Lipitor lost U.S. patent protection from cheaper generic competition in the past year.
Generic drugs hurt pharmacy revenue because they cost less than brand-name products. But they help profitability, because they provide a wider margin between the cost for the pharmacy to purchase the drugs and the reimbursement it receives.
Rite Aid has a string of quarterly losses dating back to 2007, but they have grown smaller in recent quarters. Chairman and CEO John Standley said in a statement that Rite Aid continues to make "significant progress in our turnaround efforts." He said the company has improved prescription counts at stores open at least a year and adjusted earnings before income, taxes, depreciation and amortization for seven straight quarters.
Rite Aid now expects a fiscal 2013 loss to range between 9 cents and 23 cents per share, on revenue of between $25.1 billion and $25.4 billion. In June, it forecast a loss of 13 cents to 29 cents per share, on revenue ranging from $25.3 billion to $25.7 billion.
Analysts expect, on average, a loss of 15 cents per share, with estimates ranging from a loss of 8 cents to a loss of 21 cents. Wall Street forecasts revenue of $25.42 billion, on average, with estimates ranging from $25.28 billion to $25.72 billion.
Rite Aid had 4,643 stores at the end of the quarter, trailing both Walgreen and CVS Caremark Corp.
Company shares climbed 4 cents, or 3.1 percent, to $1.35 Thursday before markets opened.