What happened
Shares of pharmacy stock Rite Aid (RAD +0.00%) fell as much as 17.3% in morning trading on Wednesday after reporting fiscal third-quarter 2023 financial results. The stock didn't recover much by noon ET, when it was down 14.1%.
So what
Quarterly revenue fell 2.3% to $6.08 billion, and net loss nearly doubled to $67.1 million, or $1.23 per share. Retail results were about flat from a year ago, but margins were down, while pharmacy services revenue fell 7.1% to $1.73 billion.
OTC: RAD
Key Data Points
It was guidance that really concerned investors. Management now expects full fiscal-year 2023 revenue to be between $23.7 billion and $24 billion, with a net loss of $584 million to $551 million. Only three months ago, they expected $23.6 billion to $24 billion in revenue and a net loss of $520.3 million to $477.3 million, so clearly margins and costs are deteriorating quickly.
Now what
Management said shrinkage (or theft) and seasonal markdowns were driving a lot of the guidance reduction. But it seems clear the company isn't operating at an efficient level.
In the earnings release, management did say they expect positive free cash flow in fiscal 2023, but the losses appear to be getting worse, not better. That will keep me out of this stock until we see a clear improvement in operations. There are other pharmacy stocks on the market that aren't losing money in what should be a lucrative pharmacy market.
