Retail

Rite Aid ‘disappointed’ at 3Q loss of $84.8M

COURTESY RITE AID CORP.
“EVEN THOUGH our front-end sales started to turn positive in November, we are disappointed with our results,” CEO Mary Sammons said today.
Posted 12/20/07

CAMP HILL, Pa. – Rite Aid Corp. (NYSE: RAD) today posted a loss of $84.8 million or 12 cents per diluted share for the fiscal third quarter ended Dec. 1, compared with a year-ago profit of $1.1 million.

The company cited about $200 million in expenses related to its acquisition this spring of 1,800 Brooks and Eckerd pharmacies – $53.3 million in integration costs, $16.7 million in store closing and impairment costs, $69.7 million in depreciation and amortization and $62.1 million in interest – as well as a decline in demand for flu remedies film processing and snacks.

Rite Aid posted third-quarter revenue of $6.52 billion, an increase of 51.0 percent from the third quarter of last year, before the Brooks-Eckerd acquisition.

Same-store sales at Rite Aid pharmacies open more than one year rose 0.7 percent, as same-store pharmacy sales rose 1.2 percent and “front-end” sales of non-pharmacy goods rose 0.4 percent, the company said.

“Even though our front-end sales started to turn positive in November, we are disappointed with our results,” Mary Sammons, the company’s chairman, president and CEO, said in a statement today. “Like the rest of the industry, our business has been negatively impacted by a slow start to the cough, cold and flu season and a more cautious consumer.”

The loss exceeded analyst expectations, based on the 8-cent-per-share median estimate from a Bloomberg News survey of eight economists.

“On the positive side, we’re pleased with our progress on the Brooks Eckerd integration and continue to expect all of the acquired stores to be converted and integrated into Rite Aid by fall of next year,” Sammons said. “Our new and relocated store development is also on track for the year.”

In the third quarter, Rite Aid said it opened 12 new stores, relocated 21 and closed or sold 64 stores – mostly, former Brooks or Eckerds shops near existing Rite Aid stores – leaving the company with 5,089 stores in operation on Dec. 1.

“They’ve suffered from having older locations and really capital-starved stores,” Mitch Corwin, an analyst at Morningstar Inc. in Chicago, told Bloomberg News. “They are dealing with companies with greater resources like Walgreen and [Woonsocket-based CVS Caremark].”

Going forward, Rite Aid predicted full-year sales of $24.3 billion to $24.6 billion, down from its previous estimate of $24.5 billion to 25.1 billion. The company also widened its loss projections for fiscal 2007 to a loss of 27 to 31 cents per diluted share from its previous estimate of a 15 cent to 27 cent per share loss. “The cough, cold and flu season continues to be weaker than last year ,and we are seeing slower holiday sales than expected so far," Sammons said of the change.

Rite Aid Corp. (NYSE: RAD) is the third-largest drugstore chain nationwide and the largest on the East Coast, with more than 5,100 stores in 31 states and the District of Columbia and annual revenue of $27 billion. Additional information is available at www.riteaid.com.

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