Rite Aid’s Q2 sales and earnings top projections

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Revenue climbed 11.5% to $5.98 billion.

CAMP HILL, Pa. — Rite Aid’s second quarter sales and earnings beat Wall Street’s forecast.

Heyward Donigan

Adjusted earnings per share of 25 cents topped analysts’ projection of a 1 cent loss.  Revenue for the period ended August 29 climbed 11.5% to $5.98 billion, driven by store and PBM gains, and bettering the forecast $5.75 billion.

The company narrowed its net loss by $65.5 million from the year-ago period to $13.2 million. Adjusted EBITDA from continuing operations increased $17.4 million, or 13%, to $151.6 million, driven by increased revenues and a reduction in SG&A expenses.

For the full year Rite Aid issued a revised guidance projecting a loss of $140 million to $190 million, with adjusted EPS ranging from a loss of 67 cents to a gain of 9 cents. It expects fiscal 2021 revenue of $23.5 billion to $24 billion, with same-store sales forecast to rise 3% to 4%. Cash flow is projected to be between $110 million and $160 million. The guidance assumes strong demand for flu immunizations, continued improvement in pharmacy network management at Elixir and savings from previously announced cost reduction initiatives, offset by continued reimbursement rate pressure and the impact of a less severe cough, cold and flu season on O-T-C sales and related prescriptions.

“We are pleased with our second quarter performance as we delivered another quarter of strong results while making solid progress on our bold, new RxEvolution strategy,” said president and chief executive officer Heyward Donigan. “Our retail pharmacists and associates have always been deeply committed to our communities, and they are doing a great job protecting our customers during a global pandemic. Thanks to them, Rite Aid continues to gain retail market share and increase both same store prescription count and front-end sales.”

“And at Elixir, our new leadership team is in place, and we are making progress on modernizing and integrating our many assets,” she added. “We also officially launched our new Elixir brand and are focused on enhancing our curated solutions, products, clinical and digital capabilities. We grew membership in our Medicare Part D business and benefitted from strong expense control, especially as we continue to integrate Rite Aid and Elixir.

“I am so proud of our 50,000 associates and how they are working together each and every day to deliver operational excellence and help our customers to not just get healthy, but get thriving. Together, we are building a strong foundation for sustainable growth and setting the stage to engage with consumers in ways never before seen in health care. A whole new Rite Aid is coming to life, and I’m excited to continue our journey to become a dominant mid-market PBM, unlock the value of our pharmacists and revitalize our retail and digital experiences.”

The improvement in net loss was due primarily to an increase in adjusted EBITDA, decreases in income tax and interest expense, a LIFO credit in the current quarter compared to a LIFO charge a year ago, and a gain on debt modification. These benefits were partially offset by an increase in lease termination and impairment charges caused by the wind down of the RediClinic business.

Retail Pharmacy Segment revenues from continuing operations increased 4.4 percent. Same-store sales increased 3.5 percent, consisting of a 4.6 percent increase in front-end sales and a 2.3 percent increase in pharmacy sales. Front-end same store sales, excluding cigarettes and tobacco products, increased 6.1 percent, driven by increases across a number of categories. The company increased its front-end market share by 130 basis points in dollars and 150 basis points in unit sales. The number of prescriptions filled in same stores, adjusted to 30-day equivalents, increased 2.6 percent, driven by increases in maintenance prescriptions, supported by personalized medication therapy management interventions and home deliveries, partially offset by a reduction in acute prescriptions of 4.9 percent.

Adjusted EBITDA  was $122.3 million or 3.0 percent of revenues compared to last year’s $92.7 million or 2.4 percent of revenues. The increase of $29.6 million is due to a reduction in SG&A expenses and increased gross profit. SG&A expenses were favorably impacted by changes to modernize associate paid time off  plans along with strong expense control. These savings were partially offset by incremental costs associated with the COVID-19 pandemic and the absence of Transition Services Agreement income, as services under that agreement have been completed. Gross profit benefited from increased revenue, partially offset by continued pharmacy reimbursement rate pressures that were not fully offset by generic drug cost reductions.

Pharmacy Services Segment revenues were $2.0 billion, an increase of 29.1 percent. The increase was due primarily to a membership increase of 259,000 in Medicare Part D.

Pharmacy Services Segment adjusted EBITDA was $29.3 million or 1.4 percent of revenues  compared to last year’s $41.5 million or 2.6 percent of revenues. The decrease  of $12.3 million was primarily due to a reduction of $21.0 million in gross profit related to a change in rebate aggregator at the MedTrak subsidiary. The company anticipates that the new rebate aggregator contract will drive improved gross profit for the company and savings for its clients. The unfavorable gross profit reduction was partially offset by increased revenues, improved pharmacy network management and strong expense control.



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