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Why Rite Aid Corporation Stock Fell Today

By Keith Speights - Apr 15, 2019 at 4:28PM

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The negative impact of the pharmacy retailer's disappointing Q4 update last week continued to weigh on the stock.

What happened

Shares of Rite Aid Corporation ( RAD -0.92% ) had fallen by 12% as of 3:32 p.m. EDT on Monday. The decline appears to be a continuation of the sell-off that began last week, after the pharmacy retailer reported disappointing fourth-quarter earnings results.

So what

There's not much for investors to like about Rite Aid right now. The company missed analysts' expectations for its Q4 revenue and earnings. And Rite Aid provided revenue guidance for fiscal 2020 below the consensus Wall Street estimate.

Pharmacist with unhappy customer

Image source: Getty Images.

Today's decline might present a buying opportunity if there were good reasons to think that Rite Aid was close to turning things around. Unfortunately, that doesn't appear to be the case.

On the company's Q4 conference call, Rite Aid CEO John Standley said the pharmacy retailer has three top priorities. First, he stated that Rite Aid will "leverage and more clearly align our unique capabilities," including the expertise of its pharmacists "to help payers in delivering a higher level of care to patients." Standley said the company's second priority is in "reimagining our front-end offer," specifically, optimizing the products and services that it offers. Rite Aid's third priority is to implement new processes and procedures to control costs more effectively and maximize operational efficiency.

The problem with these strategic priorities, though, is that it's hard to nail down just how much they will actually improve Rite Aid's top and bottom lines. With the company's disappointing revenue guidance, it's unlikely that its strategy will satisfy investors anytime soon.

Now what

One significant development for Rite Aid is just around the corner: The company plans to execute a reverse stock split on April 22, at a ratio of 1 to 20. This maneuver is being undertaken to ensure that Rite Aid meets the listing requirements of the New York Stock Exchange.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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