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Why Rite Aid Stock Plummeted 27.9% in April

By Steve Symington - May 9, 2019 at 10:00AM

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The market was none too pleased about the pharmacy retail chain's progress last quarter.

What happened

Shares of Rite Aid (RAD -0.53%) dropped 27.9% in April, according to data from S&P Global Market Intelligence, after the pharmacy retail chain delivered underwhelming fiscal fourth-quarter 2019 results.

 Rite Aid stock slumped hard in the days following its April 11 report, which revealed a hefty net loss from continuing operations of $255.6 million, or $0.24 per share, and a slight decline in revenue to $5.38 billion. Adjusted for one-time items like acquisition and restructuring costs, Rite Aid's (non-GAAP) net loss was a more modest $13.3 million, or a penny per share.

Analysts, on average, were modeling a wider net loss of $0.02 per share on significantly higher revenue of $5.56 billion.

Tired-looking businessman looking at his laptop while propping up his chin with his left hand.


So what

CEO John Standley insisted the company "continued generating critical momentum in key areas of [the] business while taking important steps to position Rite Aid for future growth."

Rite Aid managed to achieve its third straight quarter of increasing same-store pharmacy sales and prescription counts, for example, even given this year's mild flu season. The company also refinanced its senior secured credit facility during the quarter, pushing out its debt maturities and providing much-needed liquidity to implement its turnaround initiatives. 

Now what

"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 elaborated. "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."

Given its steep declines in recent years, Rite Aid has since completed a previously planned 1-for-20 reverse split. The move essentially combined every 20 existing shares for one new share to artificially raise Rite Aid's stock price, with the goal of ensuring it remains in compliance with the New York Stock Exchange's minimum listing requirement of $1 per share.

But that's hardly a long-term fix for Rite Aid's business. If Rite Aid can't deliver on its promises for eventually returning to sustained, profitable growth going forward, it could be only a matter of time before the company is facing the same share-price dilemma once again.

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