Things keep getting even harder for investors in one of this year's biggest sinkers. Shares of Rite Aid (NYSE:RAD) tumbled 18% last week after putting out disappointing quarterly results. Shares of the jilted drugstore operator have now plummeted 76% in 2017. You have to go back more than four years to find the last time that Rite Aid stock was trading below the $2 mark. 

Revenue clocked in at $7.7 billion for Rite Aid's fiscal second quarter, 4% lower than where it was at a year earlier. Analysts were holding out for a much smaller dip on the top line. Rite Aid had a reported profit of $0.16 a share for the period, but that was primarily because of the $325 million it received from Walgreens Boots Alliance (NASDAQ:WBA) after a deal for Rite Aid to be acquired fell through earlier this year. Remove that one-time gain, and Rite Aid's checking in with an adjusted deficit of $0.01 a share.

A "Healthy isn't a goal, it's a way of living" sign in a Rite Aid ad.

Image source: Rite Aid.

Rite of passage

It's not a surprise to see Rite Aid in a rut. This is a retailer that was planning to be acquired outright after striking the original $17.2 billion deal with Walgreens Boots Alliance nearly two years ago. With antitrust regulators shuffling their feet, the deal was eventually reworked into a partial asset sale, and even that transaction was ultimately pared back to clear regulatory approval.

A lame-duck Rite Aid has understandably struggled. Comps for the latest quarter declined 3.4%, though the non-pharmacy side experienced a modest 0.9% hit. The pharmacy end had a larger 4.6% decline -- a problem, since it's what accounts for more than two-thirds of its sales -- but nearly half of that hit is the negative impact of new generic drug introductions lowering prices. Overall pharmacy traffic took a more manageable 1.8% hit, which was largely the result of Rite Aid's exclusion from some pharmacy networks. 

The situation is still a mess. Rite Aid sees pharmacy margin pressure continuing in the near term. Reimbursement rates have been challenging. The windfall of $4.375 billion from the sale of 1,932 stores will trickle in over the coming months, which will allow it to pay off roughly $270 million of net liabilities related to those divested assets.

Rite Aid's smaller footprint should be more profitable, and the greater weight of its three non-drugstore businesses will make it less susceptible to its recent pharmacy reimbursement rate struggles. Rite Aid isn't offering up guidance -- there are too many moving parts at the moment. However, the sell-off seems extreme. 

Rite Aid's market cap is now a quarter of what it was when the year began. The company's enterprise value -- the better metric in describing the value of any company, especially a highly leveraged one like Rite Aid -- is off by a still-steep 40%. This has been a brutally disappointing stock this year, but Rite Aid will be leaner and in much better financial shape than it was once Walgreens completes the asset sale purchase by next spring. The upside is substantial if Rite Aid gets things right, though the risks are great until it is able to turn things around.    

Rick Munarriz has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.