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Rite Aid narrows Q2 loss

Published: 14:03 20 Sep 2012 BST

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Rite Aid Corp. (NYSE:RAD) late Wednesday narrowed losses for the second-quarter as the drug-store chain reported improved margins, though revenue fell.

For the quarter ended September 1, Rite Aid posted a loss of $38.8 million, or five cents per share, from the year-ago loss of $92.3 million, or 11 cents. Revenue was 0.6 per cent lower at $6.23 billion.

Analysts polled by Thomson Reuters most recently projected a loss of seven cents on revenue of $6.21 billion.

The company attributed the improvement to decreases in store closings, as well as fewer impairment and depreciation and amortization charges, amongst other factors.

Same-store sales were flat from a year ago and front-end sales rose 1.4 per cent, but pharmacy sales shrank 0.7 per cent.

Gross margin rose to 27.5 per cent from 26.3 per cent as input costs fell by 2.2 per cent. Total costs and expenses were also down 1.5 per cent.

Rite Aid also revised its outlook for the year, now expecting a loss of between nine and 23 cents on revenue of $25.1 billion to $25.4 billion.

Its prior view was for a loss of between 13 and 29 cents on revenue between $25.3 billion and $25.7 billion.

The company said it lowered its sales estimates due to the introduction of more generic drugs and continued reimbursement rate pressure. Same-store sales are now projected between a decline of 1% to a gain of 0.25%, from its June forecast of a 0.5% decrease to a 1% increase.

The No. 3 U.S. drug-store chain has posted losses since its 2007 acquisition of the Brooks and Eckerd chains that saddled it with debt just before consumers reduced spending.

The number of prescriptions filled in same stores increased 4 per cent, benefiting from the dispute between Walgreen (NYSE:WAG) and Express Scripts Holding Co. (NASDAQ:ESRX).

Analysts have expected Rite Aid and CVS (NYSE:CVS) to gain market share as a result of Express Scripts's exit from Walgreen's network at the start of this year. But that disagreement was resolved and former Walgreen customers as of last week were able to return to the drug-store for prescriptions.

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