What happened
Shares of Rite Aid (RAD 5.26%) fell 10% on Thursday after the retail pharmacy company reported lackluster earnings and guidance and said it is proceeding with a plan designed to prevent its stock from being delisted.
So what
Rite Aid reported a fiscal fourth-quarter adjusted loss of $0.01 per share, slightly better than the $0.02-per-share loss consensus estimate, on revenue of $5.38 billion that was short of the $5.56 billion analysts had expected. Sales at its retail pharmacy segment, at $3.97 billion, were flat year over year, while its pharmacy services segment grew by about 1.2%.
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The company said that pharmacy sales faced a 100-basis-point negative impact from new generic medicine introductions. Rite Aid and other pharmacy companies have also struggled due to falling healthcare reimbursement costs and from a relatively mild flu season that could have otherwise sparked sales.
Rite Aid said it expects to generate full-year fiscal 2020 revenue of between $21.5 billion and $21.9 billion, short of the $22.09 billion consensus estimate, and expects to produce per-share earnings in the range of a $0.01 loss to a $0.04 during the period. Analysts are expecting a $0.02-per-share profit in the new fiscal year.
Also, Rite Aid said its board had green-lighted a 1-for-20 reverse stock split. The split will reduce the number of shares outstanding from nearly 1.1 billion to about 54 million and should elevate the share price safely above the $1 minimum required for listing on the New York Stock Exchange. The stock will begin trading on a split-adjusted basis at market open on April 22.
Now what
The drop continues a familiar pattern for Rite Aid shares, which lost 14.2% in March and are now down nearly 30% year to date. CEO John Standley in a statement noted that same-store pharmacy sales and prescription count were up in the quarter, and Rite Aid was also able to increase Medicare Part D activity.
"As we begin our new fiscal year, we'll look to build on this momentum as we continue transforming our business to better align with our new operational footprint and deliver greater value in the emerging value-based care marketplace," Standley said. "These efforts will include a strong focus on driving positive patient health outcomes, evolving our front-end business, expanding our omni-channel capabilities, and controlling costs to become a more efficient and profitable company."
Standley, CEO since 2010, will soon be handing the reins over to someone else to navigate the turnaround. The company last month said it would eliminate about 400 corporate jobs and that Standley would step down once a successor is found.
