The third-largest drugstore in the U.S., Rite Aid (NYSE:RAD), reported its third-quarter results before the opening bell this morning, pointing to a bifurcated sales environment within its stores of higher pharmacy sales and weaker front-end sales.
For the quarter, Rite Aid reported a 1.9% increase in revenue to $6.36 billion from $6.24 billion in the year-ago period which was fueled, in its entirety, by a 3.5% increase in pharmacy sales and countered by a 0.2% decline in front-end sales. Total prescriptions filled increased by 0.7% as prescription sales amounted to nearly 69% of total drugstore sales. Focusing on its pharmacy business is extremely important for Rite Aid with the upcoming implementation of Obamacare, which could greatly expand the number of prescriptions written.
Overall, same-store sales improved by 2.3%, which is an important figure as it excludes stores opened within the past 12 months and gives investors a better indication of Rite Aid's organic growth capabilities.
Looking at the bottom line, Rite Aid delivered net income of $71.5 million, a 15.6% increase over the prior year. However, a $0.03 charge related to the redemption of preferred stock knocked its EPS down to $0.04 from the $0.07 it reported last year.
Where the wheels fell off the bus was Rite Aid's updated fiscal 2014 outlook, which includes a revenue range of $25.3 billion to $25.425 billion, a same-store sales increase of 0.35%-0.85%, and EPS of between $0.17 and $0.23 per share. Previously, Rite-Aid had guided investors to expect $0.18 to $0.27 in EPS for fiscal 2014, thus investors' disappointment with its outlook.
Shares of Rite-Aid were down just shy of 10% by midday.
Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.
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