Please ensure Javascript is enabled for purposes of website accessibility

Rite Aid Earnings: An Early Look

By Dan Caplinger - Apr 9, 2013 at 3:50PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Will the ailing drugstore chain ever fully recover?

Earnings season has begun, and on Thursday, Rite Aid (RAD 1.63%) will release its latest quarterly results. The key to making smart investment decisions on stocks reporting earnings is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise. That way, you'll be less likely to make an uninformed knee-jerk reaction to news that turns out to be exactly the wrong move.

Rite Aid has been the third wheel of the U.S. drugstore industry for a long time, as it has struggled to reach profitability even as its main rivals have seen substantial growth in sales and earnings over the years. Can Rite Aid ever recover? Let's take an early look at what's been happening with Rite Aid over the past quarter and what we're likely to see in its quarterly report.

Stats on Rite Aid

Analyst EPS Estimate

($0.02)

Year-Ago EPS

($0.18)

Revenue Estimate

$6.45 billion

Change From Year-Ago Revenue

(9.8%)

Earnings Beats in Past 4 Quarters

3

Source: Yahoo! Finance.

Does Rite Aid have the right prescription for its business?
Analysts have had mixed views on Rite Aid's prospects over the past few months. They've cut their initial break-even estimates for the company's most recent quarter to a loss of $0.02 per share, but they've also boosted fiscal 2014 earnings estimates to a profit of $0.03 per share. The stock has focused on the longer-term view, as Rite Aid's share price has jumped more than 30% since the beginning of the year.

For a while last year, it looked as if Rite Aid might finally be turning the corner after a long period of weakness. A dispute between rival Walgreen (WBA 1.74%) and pharmacy benefit manager Express Scripts (ESRX) led to an exodus of customers away from Walgreen, and Rite Aid appeared to capture its share of those seeking to have their prescriptions filled elsewhere.

Since then, though, Rite Aid has sunk back into old bad habits. In March, it announced a 2% drop in same-store sales, with a drop in pharmacy sales of 4.5% more than offsetting a nearly 4% increase in revenue from the front-end of its stores. Yet even that front-end strength came largely from Easter's coming in March rather than April this year, suggesting that the retailer's results were even weaker than reported. Meanwhile, Walgreen has seen same-store sales grow as its new loyalty program attempts to win back customers from Rite Aid and CVS Caremark (CVS 1.38%).

Rite Aid has fought back, though, seeking to match up to Walgreen and CVS by remodeling its stores. But because it is already debt-ridden, Rite Aid can't afford to do store remodeling at a very fast pace, with Fool contributor Adam Levine-Weinberg arguing that it could take a decade for the company to finish all of its renovations.

In Rite Aid's quarterly report, watch for commentary about the new services that it and other pharmacies may be offering to customers. If Rite Aid can bring brand-new customers to provide both acute-care and chronic-care services, it could finally bring the turnaround that investors have looked for in recent years.

Click here to add Rite Aid to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Rite Aid Corporation Stock Quote
Rite Aid Corporation
RAD
$6.85 (1.63%) $0.11
Walgreens Boots Alliance, Inc. Stock Quote
Walgreens Boots Alliance, Inc.
WBA
$38.56 (1.74%) $0.66
Express Scripts Holding Company Stock Quote
Express Scripts Holding Company
ESRX
CVS Health Corporation Stock Quote
CVS Health Corporation
CVS
$93.94 (1.38%) $1.28

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
316%
 
S&P 500 Returns
112%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 07/03/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.