Company will shutter 63 stores, and more later.
CAMP HILL, Pa. – Rite Aid Corp. posted adjusted earnings of $8.2 million or 15 cents per share for the third quarter, surprising analysts who had forecast an 18 cents per share loss.
The company reported a net loss of $36.1 million, or 67 cents per share, for the quarter ended November 27. Adjusted EBITDA rose 12.7 percent from the year-ago quarter to $154.8 million, or 2.5 percent of revenues.
Revenue rose to $6.23 billion but fell below Wall Street’s consensus of $6.32 billion, and the company announced a store closure plan starting with 63 outlets.
“We delivered a solid quarter,” said Rite Aid president and chief executive officer Heyward Donigan. “Despite challenges in the labor market, our pharmacists and store teams were able to meet the unprecedented volumes for COVID and flu immunizations, COVID testing and other clinical services, which clearly demonstrates our Lean work to free up capacity is paying off.”
The company also has taken steps to boost value for Elixir’s PBM clients by entering into a new rebate aggregation agreement with Prime Therapeutics, she added. “In addition to the benefit to clients, this partnership will enable Elixir to be more competitive in the marketplace and improve profit margins.”
Shuttering stores will “reduce costs, drive improved profitability and ensure that we have a healthy foundation to grow from, with the right stores in the right locations, for the communities we serve and for our business,” Donigan said. The initial 63 closings are expected to provide an annual EBITDA benefit of some $25 million.
Encouraged by recent momentum, Rite Aid expects “to deliver a significant increase in our fourth quarter adjusted EBITDA ,” she noted, and has raised its full-year guidance. Total revenues for the year are expected to be between $24.4 billion and $24.7 billion. Pharmacy Services Segment revenue is expected to be between $7.1 billion and $7.2 billion (net of any intercompany revenues to the Retail Pharmacy Segment). The net loss is expected to be between $230 million and $189 million. Adjusted EBITDA is expected to be between $500 million and $520 million. An adjusted net loss per share is expected to be between 49 cents and 4 cents. Capital expenditures are expected to be approximately $275 million.
In the third quarter Retail Pharmacy Segment revenues increased 7.9 percent over the prior year quarter, driven by an increase in same store sales and the inclusion of Bartell’s results. Same store sales increased 4.4 percent, consisting of a 5.9 percent increase in pharmacy sales and a 0.4 percent increase in front-end sales. Front-end same store sales, excluding cigarettes and tobacco products, increased 1.0 percent. The number of prescriptions filled in same stores, adjusted to 30-day equivalents, increased 7.9 percent. In addition to the benefit from 4 million COVID-19 vaccinations, maintenance prescriptions increased 1.7 percent while other acute prescriptions increased 3.9 percent on a same store basis when excluding COVID-19, flu and all other ancillary vaccinations. Prescription sales from continuing operations accounted for 71.1 percent of total drugstore sales. The total store count at the end of the quarter was 2,488.
Retail Pharmacy Segment adjusted EBITDA was $125.9 million, or 2.8 percent of revenues, compared to last year’s $88.6 million, or 2.2 percent of revenues. The increase in adjusted EBITDA was due to increased gross profit, partially offset by an increase in selling, general and administrative (SG&A) expenses. Gross profit benefited from higher pharmacy same store sales, including immunizations, partially offset by pharmacy reimbursement rate pressures that were not fully offset by generic drug cost reductions and an increase in front-end gross profit resulting from higher front-end same store sales and a reduction in markdowns. SG&A expenses were negatively impacted by incremental payroll costs to support COVID immunizations, increases in bonus expense for store, field and corporate associates, increases in workers compensation costs and cycling the benefit from the prior year change to modernize our associate PTO plans.
Pharmacy Services Segment revenues were $1.9 billion, a decrease of 10.8 percent. The decrease was primarily the result of a planned decrease in Elixir Insurance membership and a previously announced client loss.
Pharmacy Services Segment Adjusted EBITDA from continuing operations was $28.9 million, or 1.6 percent of revenues, compared to last year’s $48.8 million, or 2.3 percent of revenues. Gross profit dollars were negatively impacted from the decline in revenues, a reduction in rebates and an increase in the medical loss ratio at Elixir Insurance. SG&A expenses improved due to reduced payroll and a reduction in broker commissions.