What happened

In response to lowering its financial guidance for the fiscal year, Rite Aid Corporation (NYSE:RAD) saw its shares fall 10% as of 11:15 a.m. EDT on Monday.

So what

Management updated its financial outlook for fiscal year 2019, and the news wasn't pretty. The company stated that generic drug market conditions haven't been as favorable as it had initially predicted back in April. As a result, the company now believes that its financial targets are off by about $80 million. Based on this updated information, management shared the following financial guidance with investors:

  • Adjusted EBIDTA is expected to land between $540 million and $590 million. This is well below the previously discussed range of $615 million to $675 million. 
  • Net loss is expected to land between $125 million and $175 million. This is also considerably worse than the prior guidance of a net loss between $40 million and $95 million.
  • Adjusted net loss per share is projected to land between $(0.04) and break even. This is also down from its prior outlook of earnings of $0.02 to $0.06.
  • Sales, same-store sales, and capital expenditures guidance remain unchanged.

Importantly, this updated guidance will not have any impact on its proposed merger with Albertsons.

BUsiness man looking stressed at computer with cups of coffee everywhere

Image source: Getty Images.

Given the negative financial adjustments, it isn't hard to figure out why shares are cratering today.

Now what

Today's financial update should serve as even more proof that Rite Aid needs to do something -- anything -- to find a way to right its ship. My Foolish colleague Rick Munarriz pointed out that merging with Albertsons makes a lot of sense, even if that view isn't universally praised by Wall Street. The combined entity would certainly command more bargaining power with suppliers, which could go a long way toward helping it compete against giants like CVS Health, Walgreens Boots Alliance, and, increasinglyAmazon

The shareholder vote to approve the merger is set for Aug. 9, so investors won't have to wait long to find out what's happening next. Given today's financial update, it's hard to be optimistic about this company's chances of competing over the long term if the merger fails to materialize.