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Rite Aid Delivers Another Disappointment With Its Q1 Results

By Keith Speights - Updated Jun 27, 2019 at 10:18AM

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The big pharmacy retailer missed Wall Street estimates on both the top and bottom lines.

There wasn't much for investors to be excited about the last time Rite Aid Corporation (RAD 5.70%) reported its quarterly results. The pharmacy chain's revenue fell with a wider net loss. Rite Aid has been a big loser for investors so far this year, too, with the stock plunging more than 50%.

Rite Aid reported its first-quarter earnings results after the market closed on Wednesday. Investors hoping for some good news for a change were sorely disappointed. Here's what you need to know from Rite Aid's Q1 update.

A pharmacist handing a man a prescription.

Image source: Getty Images.

By the numbers

Rite Aid reported revenue in the first quarter of $5.37 billion. This reflected a slight decrease from the prior-year-period revenue total of $5.39 billion. It also fell a little short of the consensus Wall Street analyst projection of $5.38 billion.  

The company's Q1 net loss reported under generally accepted accounting principles (GAAP) was $99.6 million, or $1.88 per share. This was much worse than the $41.7 million, or $0.79 per share, GAAP net loss reported in the same quarter of 2018.

Rite Aid posted an adjusted non-GAAP net loss in the first quarter of $7.5 million, or $0.14 per share. Analysts were expecting an adjusted net loss of $0.07 per share.

The pharmacy chain ended the first quarter with cash and cash equivalents of $190.5 million. This was an increase from the $144.4 million on hand as of March 2, 2019.

Behind the numbers

It was another disappointing quarter for the drugstore chain. Revenue for Rite Aid's retail pharmacy segment decreased by 0.8% to $3.86 billion. Although pharmacy services segment revenue increased 1.5% year over year, it wasn't enough to offset the decline for Rite Aid's larger retail segment.

The decline in retail pharmacy sales stemmed primarily from a reduction in store count in the first quarter. Rite Aid closed four stores and opened one new store for a net decrease of three stores in its total count. Pharmacy services sales increased slightly year over year due in large part to an increase in Medicare Part D revenue.

Rite Aid's most discouraging news was its deteriorating bottom line. There were several reasons for the company's widening net loss, including higher restructuring-related costs and higher income taxes. Rite Aid also faced prescription reimbursement rate pressure that weakened its pharmacy gross profit margin.

Looking ahead

Rite Aid maintained its 2020 outlook. It continues to project that full-year revenue will be between $21.5 billion and $21.9 billion. The company also still anticipates a GAAP net loss between $170 million and $220 million, with adjusted earnings between a loss of $0.14 per share and net income of $0.72 per share.

There were several assumptions made with this forecast. Rite Aid expects pressure to continue on prescription reimbursement rates. However, the company also thinks that it will see same-store prescription volume growth and benefit from its cost savings initiatives.

CEO John Standley stated that the company thinks that enhancements made to its supply agreement with McKesson and generic purchasing improvements could help improve its fortunes in the future. He also noted that Rite Aid is "identifying significant opportunities to drive further growth and operating efficiency in fiscal 2021, with a focus on reducing our reliance on traditional pharmacy reimbursement rate models."

Rite Aid has a lot of work to do to turn things around, though. Investors hoping that a white knight might swoop in to acquire the company could have a long wait.

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