Drugstore retailer Rite Aid
Rite Aid announced second-quarter results this morning that saw it miss sales and earnings expectations. Sales growth of 53.9% still sounds impressive, but most of this came from the recently closed acquisition of Brooks and Eckerd drugstores. Same-store sales expansion of 1.1% was respectable, but pales in comparison to the impressive comps archrival Walgreen
Rite Aid admittedly has a lot on its plate as it works to integrate the acquisition that has allowed it to become such a major competitor. As part of the earnings press release, management boasted that its "integration of Brooks Eckerd is off to an excellent start, and we're seeing more cost-saving synergies from the acquisition than we initially expected."
But for some reason, that isn't translating into the financial results, as the company tempered full-year sales and comps guidance and also increased its expected earnings loss to $0.15-$0.27.
The higher bottom-line loss was attributed to amortization of acquired intangible assets and higher interest expense. Years of acquisitions have increased debt to just less than 70% of total capitalization, which is definitely a high amount for most companies. Good thing Rite Aid operates in a stable industry; people need to fill their prescriptions regardless of what goes on in the economy.
Overall, though, I can't find much positive to say about recent results at Rite Aid. The stock price still looks like a steal, hovering around $4.80, which is only slightly more than Wal-Mart