Sales and earnings advanced in the fiscal 2014 third quarter at Rite Aid Corp., with flu vaccinations and wellness store remodels helping to fuel gains.

Rite Aid, third quarter, fiscal 2014, net earnings, earnings per share, same-store sales, comparable pharmacy sales, John Standley, wellness store, flu vaccinations, flu immunization, wellness initiatives, front end, adjusted EBITDA, prescription count, prescription sales

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Rite Aid sales, net income climb in 3Q

December 19th, 2013

CAMP HILL, Pa. – Sales and earnings advanced in the fiscal 2014 third quarter at Rite Aid Corp., with flu vaccinations and wellness store remodels helping to fuel gains.

Rite Aid said Thursday that for the 13-week third quarter ended Nov. 30, net earnings totaled $71.5 million, or 4 cents per diluted share, compared with $61.9 million, or 7 cents per diluted share, a year earlier.

The drug chain's earnings per share (EPS) were in line with the average analyst forecast of 4 cents, with estimates ranging from a low of 2 cents to a high of 8 cents, according to Thomson Financial.

According to Rite Aid, the net income gain stemmed mainly from declined interest costs and lease termination and impairment charges, partially offset by a higher LIFO charge and an $18.1 million benefit from the settlement of interchange fee litigation in the prior-year quarter. Diluted EPS reflected a negative impact 3 cents from the redemption of the company's Series G and Series H convertible preferred stock on Sept. 30.

Third-quarter adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) came in at $282.3 million, or 4.4% of revenue, versus $295.3 million, or 4.7% of revenue, a year earlier. Rite Aid noted that the year-ago total included the $18.1 million gain from interchange fee settlement. The current quarter's adjusted EBITDA benefited from a rise in pharmacy gross profit, driven by script count growth, and strong SG&A (selling, general and administrative) expense control, offset by a decline in front-end gross profit.

"Our solid third quarter results were driven by the continued success of our key wellness initiatives, specifically the strong start to our flu immunization campaign, and the completion of additional wellness stores, which now represent nearly a quarter of all Rite Aid stores," Rite Aid chairman and chief executive officer John Standley said in a statement.

"Our team of dedicated Rite Aid associates worked together to execute our strategy and deliver growth in same-store prescription counts, increased same-store sales and net income of more than $71 million," Standley noted. "These results reflect our continued progress in building our unique brand of health, wellness and customer engagement."

On the revenue side, Rite Aid saw sales edge up 1.9% to $6.4 billion in the third quarter from $6.2 billion a year ago. The retailer attributed the gain mainly to increased comparable pharmacy sales. Prescription sales represented 68.6% of overall drug store sales in the period.

Total same-store sales for the third quarter rose 2.3% year over year, reflecting a 0.2% dip in the front end and a 3.5% gain in the pharmacy. Rite Aid said comparable pharmacy sales included a negative impact of 88 basis points from the introduction of new generic drugs, which have lower prices but higher margins. Same-store prescription count was up 0.7%.

During the third quarter, Rite Aid relocated four stores and remodeled 94 stores, lifting the total number of wellness stores chainwide to 1,117. The company said it closed nine stores, for a total store count of 4,595 at the end of the quarter.

Also on Thursday, Rite Aid revised its fiscal 2014 earnings guidance. The company now projects net income of between $204 million, or 17 cents per diluted share, and $259 million, or 23 cents per diluted share. In its previous guidance, the company forecast net earings of $182 million, or 18 cents per diluted share, and $268 million, or 27 cents per diluted share.

On average, analysts' project Rite Aid's fiscal 2014 EPS at 24 cents, with forecasts running from a low of 21 cents to a high of 28 cents, according to Thomson Financial.

Rite Aid expects fiscal 2014 sales to come in at $25.30 billion to $25.43 billion, with same-store sales forecast to rise 0.35% to 0.85%. Adjusted EBITDA is projected at $1.25 billion to $1.28 billion. Capital expenditures for fiscal 2014 are estimated at $415 million.

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