1. Trends & External Forces

Rite Aid reports fourth quarter loss

CAMP HILL, Pa. — Rite Aid Corp. on Thursday reported a fourth quarter net loss of $18.5 million, or 34 cents per share, as results were hurt by weak cough-cold sales and other factors. The adjusted net loss for the period ended February 27 was $41.8 million, or 78 cents per share, which compared to an adjusted loss of $19.9 million, or 37 cents a share in the year-ago period.

Adjusted earnings before interest, taxes, depreciation and amortization were $41.3 million, or 0.7 percent of revenues, compared to $135.6 million, or 2.4 percent of revenues, a year earlier. The decline in adjusted EBITDA was due to a decrease in gross profit resulting from lower front-end same store sales, weather disruptions that impacted the supply chain, reimbursement rate pressure and an increase in selling, general and administrative (SG&A) expenses due to incremental costs associated with the COVID-19 pandemic.

“We remain very optimistic about the direction of Rite Aid, despite a fourth quarter that was impacted by a historically soft cough, cold and flu season, the deferral of elective procedures and related acute prescription volume and the impact of COVID-19 on selling, general and administrative expenses,” said president and chief executive officer Heyward Donigan. “This past year, we made significant progress in bringing our RxEvolution strategy to life. We redefined the role of the pharmacist, rebranded both our retail pharmacy business and Elixir, completed the strategic acquisition of Bartell’s and moved quickly to deliver solutions to meet customer needs for COVID-19 testing and vaccine administration.

“As we look ahead, our teams are continuing their heroic efforts to serve our communities and customers during this critical time. I am pleased to announce that we have administered over 2 million COVID-19 vaccines so far in the first quarter. We are also seeing prescription count trends, both acute and maintenance, return to positive levels. At Elixir, we are experiencing growth in our sales pipeline, and have recently been awarded over 200,000 new lives and over 6 million annualized scripts, with additional decisions pending in the current sales cycle. I am so proud of our 50,000 associates and the strategic progress we’re making in our journey to revitalize our brand and elevate the crucial role that pharmacy plays in the health of our customers.”

Fourth quarter revenue increased 3.3 percent to $5.92 billion. Full-year revenue climbed 9.6 percent to $24.04 billion, driven by growth in both the Retail Pharmacy and Pharmacy Services segments.

For the full year, Rite Aid had a net loss of $100.1 million, or $1.87 loss per share, compared to the prior year’s net loss of $469.2 million, or $8.82 loss per share. The reduction in net loss was due to lower income tax expense, a gain on sale of assets compared to a loss on sale of assets in the prior year, and a gain on the acquisition of Bartell Drugs. These items were partially offset by a decrease in adjusted EBITDA, a lower gain on debt modifications and retirements, higher intangible asset impairment charges, and a lower LIFO credit.

Adjusted EBITDA for the year was $437.7 million, or 1.8 percent of revenues, compared to the prior year’s $538.2 million, or 2.5 percent of revenues. The decline was due to a decrease in gross profit resulting from declines in acute scripts related to the pandemic, reimbursement rate pressure and an increase in SG&A expenses due to the impact of the pandemic and the completion of services provided under the Transition Services Agreement with Walgreens.

Retail Pharmacy Segment revenue in the fourth quarter increased 3.0 percent to $4.11 billion due primarily to the acquisition of Bartell Drugs. Same store sales decreased 0.3 percent, consisting of a 5.6 percent decrease in front-end sales and a 2.0 percent increase in pharmacy sales. Front-end same store sales, excluding cigarettes and tobacco products, decreased 5.0 percent. The decline in front-end same store sales was driven by a decline of nearly 37 percent in cough, cold and flu related categories. Difficult weather conditions also had a negative impact on same store sales for the quarter. The number of prescriptions filled in same stores, adjusted to 30-day equivalents, decreased 0.9 percent, hurt by an over 14 percent decline in acute prescriptions, partially offset by increases in maintenance prescriptions, as well as the administration of the company’s first allocations of the COVID-19 vaccine. The company increased its front-end market share in both dollars and in unit sales.

For the full year, Retail Pharmacy Segment revenue increased 4.8 percent. Same store sales increased 3.5 percent, consisting of a 3.2 percent increase in pharmacy sales and a 3.1 percent increase in front-end sales. Front-end same store sales, excluding cigarettes and tobacco products, increased 4.2 percent. Front-end sales benefited from increases in immunity, first aid and paper products, offset by decreases in over-the-counter products related to cough, cold and flu. The number of prescriptions filled in same stores, adjusted to 30-day equivalents, increased 1.3 percent, driven by increases in maintenance prescriptions, supported by personalized Medication Therapy Management interventions and home deliveries, partially offset by a pandemic influenced reduction in acute prescriptions of 9.0 percent. Prescription sales from continuing operations accounted for 66.7 percent of total drug store sales

Pharmacy Services Segment revenue was $1.9 billion for the quarter, an increase of 3.8 percent. The increase was primarily the result of higher claims revenue due to changes in member mix and benefit packages and Medicare Part D revenue with the new calendar year.

For the full year, Pharmacy Services Segment revenue was $8.0 billion, an increase of 21.5 percent. The increase was primarily the result of an increase in Medicare Part D membership.

Looking ahead, the company said the pandemic will continue to have an impact on several factors in fiscal 2022. Those include the number of individuals that receive a COVID-19 vaccine, demand for COVID-19 testing, the timing and extent to which elective procedures increase to pre-pandemic levels, the demand for flu and other immunizations and the length and severity of this year’s cough cold and flu season. As a result, Rite Aid is currently only providing guidance for its first quarter.

The company’s results for the first quarter of fiscal 2022 will be significantly impacted by the number of COVID-19 vaccinations administered during the quarter, and the related benefit to revenues and gross profit, partially offset by incremental costs to administer these vaccines. Also included in the guidance assumptions are a meaningful reduction in front-end sales compared to last year’s pandemic driven surge and continued deferral of elective procedures and the related impact on acute scripts. Rite also expects continued reimbursement rate pressure at retail, and a return of Elixir EBITDA to recent run rate levels due to good network management and expense control initiatives.

Total revenues are projected to be between $6.1 billion and $6.3 billion in the first quarter with Retail Pharmacy Segment same store sales expected to range from a decrease of 9.0 percent to a decrease of 7.0 percent compared to fiscal 2021.

Net income/loss is projected to be between a loss of $10 million and income of $10 million.

Adjusted EBITDA is projected to be between $115 million and $140 million.

The post Rite Aid reports fourth quarter loss appeared first on MMR: Mass Market Retailers.

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