What happened

Shares of Rite Aid (RAD) slumped 27.1% in September, according to data from S&P Global Market Intelligence. The stock fell after the company's second-quarter earnings release arrived with disappointing full-year earnings guidance. 

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Rite Aid published Q2 results on Sept. 24, delivering sales and earnings results that came in ahead of the market's expectations. But its annual guidance came up short and prompted a substantial pullback for the stock. 

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Image source: Getty Images.

So what

Rite Aid posted adjusted earnings per share of $0.25 on revenue of $5.98 billion in the second quarter, while the average analyst estimate had targeted EPS of roughly $0.14 on revenue $5.74 billion.

Sales for the retail pharmacy segment climbed 4.4% year over year to reach roughly $4 billion in the second quarter, and pharmacy services revenue jumped 29.1% to reach $2 billion. The company's pharmacy services segment posted strong performance thanks in large part to membership momentum for its Medicare Part D coverage services, which notched 259,000 new members in the period.

Shares initially climbed in pre-market trading following the earnings beat, but the full-year guidance outlined in the company's Q2 call prompted a steep decline for Rite Aid's share price. 

Now what

Rite Aid stock has gained some ground early in October's trading. The company's share price has climbed 1.9% in the month so far. 

RAD Chart

RAD data by YCharts

Rite Aid is guiding for full-year sales between $23.5 billion and $24 billion, which came in ahead of the average Wall Street analyst target. But the company's expectation for a GAAP net loss between $140 million and $190 million and an adjusted profitability range between earnings of $0.09 per share and an adjusted loss as high as $0.67 per share came as a shock. The average Wall Street forecast was guiding for an adjusted profit of $0.38 per share on the year, and management's targets prompted a substantial sell-off for the stock.

The company has a market capitalization of $528 million and trades at just 0.02 times this year's expected sales.