Sales edged up in the fiscal 2015 first quarter at Rite Aid Corp., which posted adjusted earnings per share in line with analyst estimates following the company's lower guidance released earlier this month.

Rite Aid, first quarter, fiscal 2015, John Standley, adjusted earnings, drug store sales, lower guidance, comparable pharmacy sales, same-store sales, front end, new generic drugs, prescription count, prescription sales, adjusted EBITDA, wellness store, revised outlook, first-quarter results, full-year guidance, drug chain

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Rite Aid sees sales rise in first quarter

June 19th, 2014

CAMP HILL, Pa. – Sales edged up in the fiscal 2015 first quarter at Rite Aid Corp., which posted adjusted earnings per share in line with analyst estimates following the company's lower guidance released earlier this month.

Rite Aid said Thursday that revenue for the first quarter ended May 31 rose 2.7% to $6.5 billion from $6.3 billion a year earlier, lifted by a gain in comparable pharmacy sales.

Same-store sales were up 3.1% for the quarter, reflecting flat results in the front end and a 4.6% increase in the pharmacy.

Rite Aid noted that comparable pharmacy sales included a negative impact of 143 basis points from introductions of new generic drugs, which have lower prices but higher margins.

Prescription count in comparable stores climbed 2.3% year over year in the quarter. Prescription sales represented 68.4% of total drug store sales for the period.

On the earnings side, first-quarter net income came in at $41.4 million, or 4 cents per diluted share, compared with $89.7 million, or 9 cents per diluted share, a year earlier. The net earnings decline stemmed mainly from a decrease in adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) and higher income-tax expense, partially offset by lower interest expense and a lower LIFO charge, Rite Aid reported.

Analysts, on average, estimated Rite Aid's first-quarter EPS at 4 cents, with projections ranging from a low of 4 cents to a high of 5 cents, according to Thomson Financial.

Adjusted EBITDA totaled $282.6 million, or 4.4% of revenue, in the first quarter compared with $344.8 million, or 5.5% of revenue, in the prior-year period. Rite Aid attributed the decrease in adjusted EBITDA primarily to a reduction in pharmacy gross profit from lower reimbursement rates that weren't offset with reductions in generic drug costs, as well as from higher salary and payroll-related expenses.

"In the first quarter, we delivered a strong store operating performance, highlighted by increases in same-store sales and same-store prescription count," Rite Aid chairman and chief executive officer John Standley said in a statement. "As we work through managing the higher-than-expected drug costs and reimbursement rate pressure that affected our financial results for the quarter, we remain focused on executing our strategy to expand our health care offering and transform Rite Aid into a growing retail health care company."

On June 5, Rite Aid issued a revised outlook for the fiscal 2015 first quarter and full year and trimmed its forecast for adjusted EBITDA, net income and adjusted EPS, citing factors affecting pharmacy margins.

The first-quarter results were in line with the revised projections, and on Thursday Rite Aid confirmed its updated full-year guidance. For fiscal 2015, the drug chain expects sales of $26 billion to $26.5 billion and a same-store sales gain of 2.5% to 4.5%. Net income is forecast at $298 million to $408 million, or 30 cents to 40 cents per diluted share. Adjusted EBITDA is estimated to come in at $1.275 billion to $1.350 billion. Capital expenditures are expected to be about $525 million.

For fiscal 2015, analysts project adjusted EPS of 35 cents on average, with estimates running from a low of 30 cents to a high of 41 cents, according to Thomson Financial.

In the first quarter, Rite Aid relocated three stores, remodeled 105 stores and expanded one store, increasing the chain's total number of wellness store locations to 1,325. The company also acquired one store and closed seven stores, giving it 4,581 stores overall as of May 31, compared with 4,615 stores at the end of the fiscal 2014 first quarter.

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