CAMP HILL, Pa. — Rite Aid Corp. on Thursday posted fourth quarter earnings results that fell below Wall Street’s expectations. The drug chain also provided a forecast for the upcoming fiscal year.
For the fourth quarter, the company reported net loss from continuing operations of $255.6 million, or 24 cents per share, adjusted net loss from continuing operations of $13.3 million, or 1 cent per share, and adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) from continuing operations of $134.1 million, or 2.5% of revenues.
“In the fourth quarter, we continued generating critical momentum in key areas of our business while taking important steps to position Rite Aid for future growth,” said chief executive officer John Standley.
“Despite a mild flu season, we delivered our third consecutive quarter of same-store pharmacy sales and prescription count growth, thanks to a record number of immunizations and other script growth initiatives. We also increased Medicare Part D membership within our EnvisionRxOptions PBM, which helped drive revenue growth and a $4.5 million increase in Pharmacy Services segment adjusted EBITDA,” he added.
“As we begin our new fiscal year, we’ll look to build on this momentum as we continue transforming our business to better align with our new operational footprint and deliver greater value in the emerging value-based care marketplace. These efforts will include a strong focus on driving positive patient health outcomes, evolving our front-end business, expanding our omnichannel capabilities and controlling costs to become a more efficient and profitable company,” Standley concluded.
Revenues from continuing operations for the fourth quarter were $5.38 billion compared to revenues from continuing operations of $5.39 billion in the prior year’s fourth quarter. Retail Pharmacy segment revenues were $3.97 billion, flat compared to the prior-year period. Revenues in Pharmacy Services were $1.46 billion, an increase of 1.2% compared to the prior-year period, which was due to an increase in Medicare Part D membership.
Same-store sales from Retail Pharmacy continuing operations for the fourth quarter increased 0.7% over the prior year, consisting of a 2.1% increase in pharmacy sales and a 1.9% decrease in front-end sales. Pharmacy sales were negatively impacted by approximately 100 basis points as a result of new generic introductions. The number of prescriptions filled in same stores, adjusted to 30-day equivalents, increased 0.8% over the prior-year period, as the company’s initiatives to drive script growth more than offset the benefit of last year’s strong flu season. Prescription sales from continuing operations accounted for 65.9% of total drug store sales.
Net loss from continuing operations was $255.6 million, or 24 cents per share compared to last year’s fourth quarter net loss from continuing operations of $483.7 million, or 46 cents per share. The improvement in operating results was due primarily to a prior-year charge of $191 million, net of tax, for the impairment of goodwill related to Pharmacy Services and lower income tax expense. Income tax expense in the current year’s fourth quarter was impacted by a $197 million charge related to an increase in the valuation allowance against the company’s deferred tax asset, while income tax expense in the prior year’s fourth quarter included a charge of $325 million relating to the revaluation of the company’s deferred tax assets as a result of the 2017 Tax Act. Other items impacting net loss from continuing operations included a LIFO charge in the current year compared to a LIFO credit in the prior year, and a decline in adjusted EBITDA.
The company also announced that in the fourth quarter it had remodeled 30 stores, bringing the total number of wellness stores chainwide to 1,765. Additionally, the company closed 56 stores, resulting in a total store count of 2,469 at the end of the fourth quarter.
For the fiscal year ended March 2, 2019, revenues from continuing operations were $21.6 billion compared to revenues of $21.5 billion in the prior year, an increase of $100 million, or 0.5%. Retail Pharmacy revenues were $15.8 billion, flat compared to the prior-year period. Revenues in Pharmacy Services were $6.1 billion, an increase of 3.3% compared to the prior year, which was due to an increase in Medicare Part D membership.
Same-store sales from continuing operations for the year increased 0.6%, consisting of a 1.7% increase in pharmacy sales and a 1.4% decrease in front-end sales. Pharmacy sales were negatively impacted by approximately 112 basis points due to new generic introductions. The number of prescriptions filled in same stores, adjusted to 30-day equivalents, increased 0.7% over the prior year due to an increase in immunizations and other initiatives to drive prescription growth. Prescription sales from continuing operations accounted for 66.6% of total drug store sales.
The company’s outlook for fiscal 2020 assumes a decline in reimbursement rates consistent with the decline experienced in fiscal 2019. However, based upon conditions in the generic drug market, the company does not expect to be able to as effectively offset these declines with generic drug purchasing savings as in the prior year. The company’s outlook also assumes a reduction of approximately $40 million in TSA (Transition Services Agreement) fee income from WBA, which the company expects to offset by the reduction in corporate selling, general and administrative (SG&A) costs that was disclosed last month. The company also has factored into the outlook an increase in rent expense of $11 million as a result of the adoption of the new lease accounting standard.
Rite Aid said it expects sales to be between $21.5 billion and $21.9 billion in fiscal 2020, with same-store sales expected to range from flat to an increase of 1% over fiscal 2019.