Company expects cost reductions to result in savings of over $40 million.
CAMP HILL, Pa. — As part of its ongoing efforts to closely manage and reduce costs, Rite Aid has eliminated 254 corporate office positions across its retail pharmacy and pharmacy services segments, the company reported today in the release of its earnings report for the first quarter.
Rite Aid has also taken steps to reduce other expenses, such as shrink advertising, rent, travel and call center expenses. In total, the company expects these reductions to result in savings of over $40 million in fiscal 2021 that were not included in its original guidance and over $55 million on a run rate basis.
At the same time, the company posted a net loss from continuing operations of $72.7 million, or $1.36 per share; adjusted net loss from continuing operations of $2 million, or $0.04 per share; and adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) from continuing operations of $107.4 million, or 1.8% of revenues.
The company also expects to incur severance costs of $7 million related to the elimination of corporate positions, which will be classified as a restructuring expense. Rite Aid currently has liquidity of approximately $1.7 billion, which consists of availability to borrow under its secured revolving credit facility of approximately $1.52 billion and cash on hand of approximately $180 million.
“I couldn’t be more proud of how our teams have worked tirelessly to support and care for our communities during these unprecedented times, while continuing to push forward in achieving our vision for the future,” said Rite Aid president and chief executive officer Heyward Donigan. “Our Retail Pharmacy teams responded to the COVID-19 crisis by taking immediate action to maintain our supply chain and stay in stock, enhance our digital experience, quickly implement safety measures, keep our stores open and provide outstanding service, all of which helped us drive double-digit front-end sales growth and gain retail market share.”
Donigan noted that Rite Aid’s full leadership team is now in place in the pharmacy services segment and has made “excellent progress” in integrating the assets of EnvisionRxOptions, soon to be renamed Elixir.
“There are certainly challenges brought about by COVID-19, including the decline in acute prescriptions and increased costs incurred to assure the safety of our associates and customers,” added Donigan. “No matter the challenge, we can execute our strategy and deliver day-to-day operational excellence in the face of a pandemic. I am amazed by the passion and spirit of our more than 50,000 associates, who have come to work every day driven by a desire to help customers stay healthy and demonstrating the essential role of pharmacy in our communities.”
Revenues from continuing operations for the first quarter, according to the company’s report, were $6.03 billion compared to revenues from continuing operations of $5.37 billion in the prior year’s quarter. Retail pharmacy segment revenues were $4.12 billion and increased 6.7% compared to the prior year period due to an increase in same store sales. Revenues in the pharmacy services segment were $1.98 billion, an increase of 26.2% compared to the prior year period, which was primarily due to an increase in Medicare Part D membership of approximately 252,000 compared to the prior year period. Retail pharmacy segment same store sales from continuing operations for the first quarter increased 6.6% over the prior year period, consisting of a 14.2% increase in front-end sales and a 2.2% increase in pharmacy sales. Front-end same store sales, excluding cigarettes and tobacco products, increased 16%, driven by increases in general cleaning products, sanitizers, wipes, paper products, liquor, over-the-counter products and summer seasonal items.
The company increased its front-end market share by 270 basis points in both dollar and unit sales. The number of prescriptions filled in same stores, adjusted to 30-day equivalents, increased 0.4% over the prior year period driven by increases in maintenance medication fills, supported by personalized medication therapy management interventions and home deliveries, partially offset by a reduction in acute prescriptions of 14.8% resulting from the postponement of outpatient medical visits and elective surgical procedures in connection with the COVID-19 pandemic. Prescription sales from continuing operations accounted for 64.2% of total drugstore sales.
Rite Aid also reports that it remains on the “front lines” of the COVID-19 pandemic providing communities with essential care, services and products and has taken several steps during the crisis, such as working with the U.S. Department of Health and Human Services to be early adopters of COVID-19 testing, launching 97 sites with the capacity to conduct more than 48,000 tests each week.
Through the Rite Aid Foundation, the company has committed $6 million to support healthcare providers and first responders, regional hot spots, community needs and the Rite Aid Foundation Associate Relief Fund.
In addition, Rite Aid has hired approximately 6,000 full and part-time associates to support store and distribution center teams and instituted “pandemic pay” policy that ensures associates are compensated if diagnosed with the virus or quarantined because of exposure.
Rite Aid has also implemented specific internal protocols to keep associates safe and ready to serve customers, including the installation of Plexiglas shields at pharmacy and front-end counters to provide additional protection; ensured contact-less capabilities at stores for prescription pickup and payment; expanded home delivery of front-end items through a new partnership with Instacart; launched a new telehealth service, Rite Aid Virtual Care, to better serve patient needs; established social distancing procedures that include marking floor areas in front of the pharmacy and front-end counters with tape to ensure 6-foot separation; waived delivery-service fees for eligible prescriptions; and followed enhanced cleaning and sanitization protocols designed specifically to prevent the spread of a wide spectrum of viruses, including COVID-19 and influenza.
During the first three weeks of June, the company saw continued increases in comparable front-end sales of 7.2% — excluding cigarettes and tobacco products — over the same prior year period, due to demand for personal care, paper products and OTC medications.
Rite Aid states it continued strong front-end performance is due to “good in-stock positioning” through vendor partnerships and store-level execution, success with keeping stores open for longer hours compared to competitors and maintaining a safe and clean store experience for associates and customers.
Same store prescription counts during the first three weeks of June increased 80 basis points over the same prior year period, according to Rite Aid, due to a lessening impact of acute prescription declines, which decreased by 11.7%.