Fourth quarter, fiscal year earnings gains top Wall Street's forecast
Net income for the fourth quarter and full year were lifted by a reduction of the deferred tax asset valuation allowance and a full year provision of income tax expense at a statutory tax rate, resulting in an income tax benefit of $1.716 billion, or $1.67 per diluted share, for the quarter and $1.682 billion, or $1.65 per diluted share, for the year, Rite Aid said Wednesday.
Excluding the tax benefit, the earnings results still beat Wall Street’s forecast for the quarter and the year.
For the fiscal 2015 fourth quarter ended Feb. 28, net income totaled $1.835 billion, or $1.79 per diluted share, compared with $55.4 million, or 6 cents per diluted share, a year earlier. Pretax income for the quarter was $119.1 million, or 12 cents per diluted share, versus $49.4 million, or 5 cents per diluted share, in the prior-year period. Rite Aid said pretax income for the 2015 quarter income reflects a LIFO credit of $23.5 million compared with LIFO charge of $44.1 million a year ago.
Analysts, on average, had projected Rite Aid’s fourth-quarter adjusted earnings per share (EPS) at 7 cents, with estimates ranging from a low of 6 cents to a high of 9 cents, according to Thomson Financial.
Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) came in at $343.3 million, or 5% of revenue, for the fourth quarter, compared with $356.3 million, or 5.4% of revenue, in the year-ago period, which reflected a favorable from a $28 million reimbursement rate adjustment related to Medi-Cal.
Fourth-quarter sales rose 3.8% to nearly $6.85 billion from about $6.6 billion a year earlier, driven mainly by a rise in same-store sales, according to Rite Aid.
Same-store sales in the quarter climbed 4.5%, including gains of 2% in the front end and 5.7% in the pharmacy. Comparable pharmacy sales reflect a negative impact of 128 basis points from introductions of new generic drugs. Script count in comparable stores grew 3.5%, and prescription sales accounted for 68.1% of overall drug store sales.
“In the fourth quarter, our strong growth in same-store sales and prescription count, as well as strong cost control, helped drive continued profitability,” Rite Aid chairman and chief executive officer John Standley said in a statement.
“These positive results contributed to a successful year in which we took significant steps to further position Rite Aid as a retail health care company. We look forward to building upon our success by leveraging our recent strategic investments to grow our business,” Standley added. “We will also continue to implement our initiatives that deliver value to our customers and help us provide greater access to convenient, affordable and high-quality health care. I thank our dedicated team of nearly 90,000 Rite Aid associates for the great work they did throughout the year to continue our recent momentum.”
For the 2015 fiscal year, net earnings totaled $2.109 billion, or $2.08 per diluted share, compared with $249.4 million, or 23 cents per diluted share, in fiscal 2014. Pretax income was $426.8 million, or 42 cents per diluted share, in fiscal 2015 versus $250.2 million, or 23 cents per diluted share, in fiscal 2014. The 2015 result includes a LIFO credit of $18.9 million, compared with a LIFO charge of $104.1 million in 2014; a loss on debt retirement of $18.5 million, versus a $62.4 million loss in 2014; and lower interest expense.
On average, analysts had forecast Rite Aid’s full-year adjusted EPS at 35 cents, with projections running from a low of 33 cents to a high of 36 cents, according to Thomson Financial.
Adjusted EBITDA for fiscal 2015 was $1.323 billion, or 5% of revenue, compared with $1.325 billion, or 5.2% of revenue, in 2014.
Fiscal 2015 sales increased 3.9% to about $26.53 billion from $25.53 billion in 2014, fueled primarily by a gain in comparable-store sales, Rite Aid said.
Full-year same-store sales were up 4.3%, reflecting increases of 1.2% in the front end and 5.8% in the pharmacy, which included a negative impact of 175 basis points from new generics. Prescriptions filled in comparable stores rose 3.5%, and prescription sales represented 68.8% of total drug store sales for the year.
During fiscal 2015, Rite Aid relocated 14 drug stores, remodeled 440 stores, expanded five stores, opened two stores, acquired nine stores and closed 28 stores. As of Feb. 28, the drug chain operated 4,570 stores.
Looking ahead, Rite Aid projected its fiscal 2015 net income at $190 million to $275 million, or 19 cents to 27 cents per diluted share. The company noted that the guidance reflects estimated income tax expense of $130 million to $180 million, or 13 cents to 18 cents per diluted share.
Analysts’ consensus estimate is for adjusted EPS of 43 cents, with projections ranging from a low of 36 cents to a high of 50 cents.
Capital expenditures are expected to be about $650 million for fiscal 2016. Rite Aid estimates its fiscal 2016 sales at $26.9 billion to $27.4 billion, with comp-store sales increasing by 2.5% to 4.5% year over year.