What happened
Drug store company Rite-Aid (RAD +0.00%) saw its shares drop 28% on Thursday. The stock closed on Wednesday at $7.03, then opened markedly lower at $5.75 on Thursday, falling to as low as $4.86 before closing at $5.06. The stock was close to its 52-week low of $4.68 and well off its 52-week high of $15.65.
So what
Rite-Aid released its fiscal 2023 second-quarter earnings before the market opened on Thursday, and the news was overwhelmingly negative. Revenue was a reported $5.9 billion, down 3% year over year, while the company said it had a net loss of $6.07 in earnings per share (EPS) compared to an EPS loss of $1.86 in the same period a year ago. While a noncash goodwill impairment charge made that loss more than normal, the company's adjusted EPS loss was $0.63 compared to $0.41 in the second quarter of 2021.
OTC: RAD
Key Data Points
If this were a one-time thing, that would be concerning, but what sent investors selling was that it was the company's third consecutive quarter with declining revenue.
Rite-Aid also lowered guidance for its yearly losses, saying it now expected to have a net loss between $477.3 million and $520.3 million, nearly double an earlier forecast of losses between $203.3 million and $246.3 million. Rite-Aid said the reason for the lowered forecast was goodwill impairment charges in its Pharmacy Services segment and additional impairment charges for closed stores.
Now what
It wasn't a great day overall for the market, but Rite-Aid's share drop was much worse than the 1.19% and 4.97% respective declines seen Thursday by competitors CVS Health Corporation and Walgreens Boots Alliance. Both healthcare companies are outgrowing Rite-Aid by opening additional clinics. CVS, which is omnipresent in Target stores, now has more than 9,900 locations in the U.S., and Walgreens has more than 9,000 locations in the U.S. Rite-Aid, which has only 2,300 locations, won't appeal to investors until it begins to cut its losses and achieve its goal of being cash-flow positive in 2023. That will be difficult because the company also has $3.2 billion in debt.
