Leading drugstore chain operator Rite Aid Corp. (RAD) posted a narrower net loss of $76.0 million in the first-quarter of fiscal 2011, compared to a loss of $98.5 million in the year-ago period. Also, the quarterly loss per share of 9 cents was narrower than the Zacks Consensus Estimate for a loss of 14 cents. Shares of Rite Aid are up about 8% this morning as investors welcomed the better-than-expected result.
Quarterly Details
Rite Aid’s revenues declined 2.1% year over year to $6.4 billion from $6.5 billion, due primarily to a 1.0% decline in same-store sales coupled with the net closure of 58 stores over the past year. During the quarter, the company closed 15, relocated 8, remodeled 1 and opened 2 stores.
Pharmacy same-store sales decreased 0.9%, hurt by the introduction of new generic drugs while prescriptions filled at comparable stores decreased 1.7% from the year-ago quarter. Front end same-stores sales declined1.3% year over year. Other than prescription drugs, Rite Aid sells a wide assortment of other merchandise, which it terms as “front end” products, including over-the-counter medications, health and beauty aids, personal care items and cosmetics.
Rite Aid’s gross profit fell 3.5% year over year to $1.7 billion, while gross margin contracted 40 basis points (bps) to 26.8%. Selling, general and administrative expenses (SG&A) declined 5.1% year over year to $1.6 billion, mainly due to management’s cost containment initiatives. The company also recorded a 79.9% reduction in lease termination and impairment charges to $13.5 million, primarily due to fewer store closures in the reported quarter. Accordingly, Rite Aid swung to an operating income (gross profit less SG&A and lease termination and impairment) of $75.3 million, compared to an operating loss of $3.6 million in the prior year quarter.
Balance Sheet and Cash Flow
At the end of the quarter, Rite Aid had cash and cash equivalents of $327.9 million and long-term debt of $6.1 billion, compared to a cash balance of $136.5 million and long-term debt of $5.5 billion in the year-ago period. During the quarter, the company generated $519.6 million of cash from operations and deployed $105.8 million towards debt repayment and $35.2 million towards capital expenditure.
Guidance and Zacks Consensus
Looking ahead, Rite Aid affirmed its fiscal 2011 revenue guidance of $25.2 billion to $25.6 billion and net loss of $355 million to $570 million, or -41 cents to -65 cents per share. The guidance is in-line with the Zacks Consensus Estimate for a loss of 52 cents per share, which has remained constant over the past 2 months.
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