Rite Aid Corp. lowered its net loss for the fiscal 2012 second quarter, beating Wall Street's forecast, as the drug store chain saw sales rise and expenses decline.

Rite Aid, second quarter, fiscal 2012 second quarter, fiscal 2012, John Standley, net loss, drug store, pharmacy, front end, revenue, same-store sales, comparable-store sales, comp-store sales, Russell Redman, wellness store, wellness+, top-line results

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Rite Aid improves top, bottom lines in 2Q

September 22nd, 2011

CAMP HILL, Pa. – Rite Aid Corp. lowered its net loss for the fiscal 2012 second quarter, beating Wall Street's forecast, as the drug store chain saw sales rise and expenses decline.

Rite Aid said Thursday that for the 13 weeks ended Aug. 27, total sales edged up 1.8% to $6.27 billion from $6.16 billion a year earlier. The revenue gain stemmed mainly from an increase in same-store sales, which were partially offset by store closings, according to the retailer.

Same-store sales for the second quarter rose 2.2% year over year, reflecting gains of 2.5% in the front end and 2% in the pharmacy. Rite Aid noted that pharmacy comparable-store sales included a 148-basis-point negative impact from generic drug introductions. The number of prescriptions filled in comparable stores inched up 0.1% over the prior-year period.

On the earnings side, Rite Aid cut its net loss for the 2012 second quarter to $92.25 million, or 11 cents per diluted share, from a loss $196.98 million, or 23 cents per diluted share, a year ago. Analysts had projected a net loss, on average, of 17 cents per share for the 2012 quarter, according to Thomson Financial. The analyst forecast ranged from a loss of 19 cents per share to 15 cents per share.

Rite Aid attributed the smaller net loss to increased revenue; decreases in selling, general and administrative (SG&A) expenses and interest costs; and a gain on bond repurchases in the current year versus a $44 million charge related to refinancing activities in the prior year. Partially offsetting those improvements was a lower front-end margin resulting from investments in the wellness+ customer rewards program, the retailer said.

Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) came in at $184.26 million (2.9% of revenue) for the 2012 second quarter, up from $181.24 million (2.9% of revenue) a year earlier. 

"We are pleased with the continued improvement in our top-line results, highlighted by three consecutive quarters of same-store sales growth," Rite Aid president and chief executive officer John Standley said in a statement.

"Customers are responding positively to our sales initiatives, including our highly popular and fast-growing wellness+ loyalty program, which now has over 44 million enrolled members," he added. "Our positive same-store sales growth, along with continued reductions in operating costs, drove an increase in adjusted EBITDA."

Standley reported that Rite Aid's new health care-focused format, dubbed the "wellness store," is gaining traction with consumers.

"We also started the rollout of our new wellness store format in the second quarter, with 40 wellness stores completed as of the end of the second quarter. Customers tell us they like the look and feel of our new format, which offers expanded clinical services, new health and wellness product offerings, and our unique on-site wellness ambassadors," he stated. "We have also expanded our immunization program, with more than 11,000 immunizing pharmacists available to provide these vital services in all Rite Aid stores." 

In the second quarter, Rite Aid relocated five drug stores, remodeled 35 stores and closed seven stores. As of Aug. 27, the chain operated 4,697 stores.

Rite Aid also raised the low end of its fiscal 2012 guidance for sales, comp-store sales and adjusted EBITDA and pared its net loss projection for the year.

The company expects revenue of $25.8 billion to $26.1 billion, with same-store sales up between 0.75% and 2%, and adjusted EBITDA of $825 million to $900 million in fiscal 2012. The net loss is now forecast at $345 million to $495 million, or 40 cents to 56 cents per diluted share, compared with the previous estimate of $370 million to $560 million, or 42 cents to 64 cents per diluted share.

Analysts, on average, project Rite Aid's 2012 revenue at $25.67 billion and the fiscal year net loss at 38 cents to 56 cents per diluted share, according to Thomson Financial.