Rite Aid nets first quarterly profit since 2007
Shares of Rite Aid jumped Thursday after the drugstore chain reported its first quarterly profit since May, 2007.
Rite Aid stores filled more prescriptions in its fiscal third quarter, an influx of generic drugs helped profitability, and sales also increased outside the pharmacy portion of its stores.
The company also raised its earnings forecast for fiscal 2013. Company shares climbed 15 cents in premarket trading to $1.19.
"We have reached a significant milestone in our turnaround efforts by returning to profitability," Chairman and CEO John Standley said in a statement. He added that the company now wants to focus on keeping its momentum.
Overall, Rite Aid earned $60.5 million, or 7 cents per share, in the three months that ended Dec. 1. That compares to a loss of $54.5 million, or 6 cents per share, in last year's quarter. Revenue slipped about 1 percent to $6.24 billion.
Analysts surveyed by FactSet expected, on average, a loss of 3 cents per share on $6.29 billion in revenue.
Rite Aid, which has seen its performance improve over the past several quarters, said its revenue fell in the quarter largely due to an increase in generic drugs.
The introduction of generic equivalents to popular brand-name drugs like the cholesterol fighter Lipitor hurts revenue for drugstores because generics cost less than their brand-name counterparts. But they also boost profitability because they come with a wider margin between the cost for the pharmacy to purchase the drugs and the reimbursement it receives.
Credit Suisse analyst Edward Kelly said in an e-mail Rite Aid's performance sets a positive tone for the industry, and the boost to profitability that drugstore chains see from generics creates a tail wind that "should remain strong through at least the next couple quarters."
Rite Aid said the number of prescriptions filled at stores open at least a year climbed 3.6 percent, an increase that was aided by a split between rival drugstore chain Walgreen Co. and pharmacy benefits manger Express Scripts Holding Co. The companies had let a contract between them expire 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.
Prescriptions accounted for nearly 68 percent of Rite Aid's total drugstore revenue.
Rite Aid, The Camp Hill, Pa., said it now expects its fiscal 2013 performance to range between a loss of 5 cents per share and net income of 3 cents per share. That compares to its forecast in September for a loss ranging between 9 cents and 23 cents per share.
It also expects revenue of between $25.15 billion and $25.3 billion, compared to a previous forecast for between $25.1 billion and $25.4 billion.
Analysts forecast, on average, a loss of 15 cents per share on $25.36 billion in revenue.
Rite Aid Corp. is the third-largest drugstore chain, with 4,633 stores in 31 states and the District of Columbia. It trails both CVS Caremark Corp. and the largest drugstore chain, Walgreen, which reports its fiscal first-quarter earnings Friday.