Rite Aid loss widens in Q3; narrows outlook
A reduction in COVID vaccine and testing revenues took a toll on Rite Aid Corp.’s third quarter performance.
The pharmacy retailer reported a net loss of $67.1 million, or $1.23 loss per share, for the quarter ended Nov.26, compared to a net loss of $36.1 million, or $0.67 per share in the year-ago quarter. The company attributed the net loss increase primarily to a decrease in adjusted EBITDA, an increase in interest expense and an increase in restructuring charges. (The company reported adjusted EBITDA of $121.9 million, or 2% of revenues.)
Revenues slipped to $6.08 billion from $6.23 billion in the prior year’s quarter, which the company said was largely due to a reduction in revenue from COVID vaccines and testing, store closures and a planned loss of covered lives at Elixir. (Elixir, a fully owned subsidiary of Rite Aid Corporation, is a pharmacy services provider that offers pharmacy benefit management services.)
Rite Aid's retail pharmacy segment revenues decreased 0.5% over the prior-year quarter, driven by a reduction in COVID vaccine and testing revenue as well as store closures. Same-store sales increased 7.5%, and consisted of a 9.5% increase in pharmacy sales and a 2.2% increase in front-end sales.
The number of prescriptions filled in same stores (adjusted to 30-day equivalents) increased 4.4% over the prior year. Total same-store prescriptions, excluding COVID immunizations, increased 3.6%. Prescription sales accounted for 72% of total drugstore sales.
“Our third quarter beat consensus on top and bottom line, and we’re pleased with our results at Elixir and our accelerated sales growth at retail,” said Heyward Donigan, president and CEO. “However, based on recent trends, we are lowering our full-year guidance due to headwinds including pharmacy margin, seasonal markdowns and higher shrink.”
In addition, Donigan said Rite Aid is kicking off a performance acceleration program, which will allow it “to fast-track initiatives that will improve sales, script volume and operating margins and free up cash.”
In November, Rite Aid launched a small format store pilot for “pharmacy deserts” and underserved communities, with the first location in Craigsville, Va., which has less than 1,000 residents. Two additional stores are planned to open in Virginia by early 2023.
Rite Aid’s net loss for its current fiscal year is expected to be between $584 million and $551 million, up from its previous estimate of between $520.3 million and $477.3 million. Total revenues are expected to be between $23.7 billion and $24.0 billion.
Adjusted EBITDA is expected to be between $410 million and $440 million versus prior guidance of between $450 million and $490 million, due to expectations of lower pharmacy margins, cautious consumer demand and the related impact on seasonal markdowns and continued shrink expense.
Rite Aid had 2,324 locations across 17 states at the end of the quarter.
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