Drugstore retailer Rite Aid
Rite Aid announced second-quarter results this morning that saw it miss sales and earnings expectations. Sales growth of 53.9% still sounds impressive, but most of this came from the recently closed acquisition of Brooks and Eckerd drugstores. Same-store sales expansion of 1.1% was respectable, but pales in comparison to the impressive comps archrival Walgreen
Rite Aid admittedly has a lot on its plate as it works to integrate the acquisition that has allowed it to become such a major competitor. As part of the earnings press release, management boasted that its "integration of Brooks Eckerd is off to an excellent start, and we're seeing more cost-saving synergies from the acquisition than we initially expected."
But for some reason, that isn't translating into the financial results, as the company tempered full-year sales and comps guidance and also increased its expected earnings loss to $0.15-$0.27.
The higher bottom-line loss was attributed to amortization of acquired intangible assets and higher interest expense. Years of acquisitions have increased debt to just less than 70% of total capitalization, which is definitely a high amount for most companies. Good thing Rite Aid operates in a stable industry; people need to fill their prescriptions regardless of what goes on in the economy.
Overall, though, I can't find much positive to say about recent results at Rite Aid. The stock price still looks like a steal, hovering around $4.80, which is only slightly more than Wal-Mart
Fool contributor Ryan Fuhrmann is long shares of Walgreen, but has no financial interest in any other company mentioned. Feel free to email him with feedback or to discuss any companies mentioned further. The Fool has an ironclad disclosure policy.