Shares of Rite Aid (RAD 3.98%) surged on Tuesday after the drugstore chain announced a plan to boost profits by resizing its store base. As of 1:30 p.m. ET, Rite Aid's stock price was up more than 17%.
Rite Aid's revenue from continuing operations rose 1.8% to $6.2 billion in its fiscal 2022 third quarter. The gains were fueled by a 7.9% jump in retail pharmacy sales, to $4.4 billion, which was partially offset by a 10.8% decline in the company's pharmacy services revenue, to $1.9 billion.
"Despite challenges in the labor market, our pharmacists and store teams were able to meet the unprecedented volumes for COVID and flu immunizations, COVID testing, and other clinical services," CEO Heyward Donigan said in a statement.
These revenue gains also helped to drive a 12.7% increase in Rite Aid's adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) from continuing operations, to $154.8 million.
To further improve its profitability, Rite Aid announced a plan to shutter underperforming stores. The company said it will close an initial 63 locations as it conducts "a rigorous assessment of its store base." Management expects these closures to increase the drugstore chain's annual EBITDA by roughly $25 million.
Additionally, Rite Aid lifted its adjusted EBITDA forecast for fiscal 2022, due in part to rising demand for COVID-19 tests and vaccines. The company now expects to generate adjusted EBITDA of $500 million to $520 million, up from a prior projection of $460 million to $500 million.