Rite Aid Earnings Fall Short -- WSJ
December 23 2016 - 3:03AM
Dow Jones News
By Anne Steele
Rite Aid Corp.'s earnings fell below estimates in the latest
quarter as pharmacy revenue was hit by pressure on
prescription-reimbursement rates and cheaper generic drugs.
Chief Executive John Standley pointed to a "difficult operating
environment created by the extended duration" of the merger process
with Walgreens Boots Alliance Inc., but highlighted strength in the
front-end business and continued growth at its pharmacy benefit
manager.
Same-store sales fell 3.4% in the quarter from a year ago as a
0.4% slip in retail sales was further weighed on by a 4.7% decrease
in pharmacy sales. The company said new generic drugs, which are
generally cheaper and less profitable, were responsible for much of
the pharmacy decrease. Prescription revenue, which make up 98% of
pharmacy sales, fell 2.4%.
"Reimbursement rates remain our largest challenge and we expect
that to continue for the remainder of the fiscal year," said Mr.
Standley.
In all for the November quarter, Rite Aid reported a profit of
$15 million, or a penny a share, compared with $59.5 million, or 6
cents, a year prior. Excluding certain items, per-share earnings
fell to 2 cents a share from 8 cents a year earlier.
Revenue edged 0.8% lower to $8.09 billion.
Analysts polled by Thomson Reuters had forecast adjusted
earnings of 4 cents on $8.23 billion in revenue.
The third-largest drugstore chain agreed last October to merge
with No. 1 Walgreens in a $9.4 billion deal. Earlier this week,
under pressure from antitrust regulators, the merger partners said
they agreed to sell 865 Rite-Aid locations to Fred's Inc. , leaving
the proposed combination with just under 12,000 stores. The deal is
expected to close in early 2017 -- pushed back from an initial
deadline as the companies continue discussions with the Federal
Trade Commission.
Rite Aid, like its rivals, has expanded into the health and
wellness sector. During the quarter it remodeled 95 wellness
stores, which offer organic food and natural personal-care options
and feature consultation rooms for discussions with pharmacists. On
Thursday, Mr. Standley said the company will remain focused on
improving clinical services like immunizations and medication
adherence, converting additional stores.
In February 2015, Rite Aid agreed to buy pharmacy-benefit
manager Envision Pharmaceutical Services for about $2 billion. That
helped revenue in its pharmacy services segment rise 9.7% to $1.65
billion. But revenue in its retail pharmacy segment -- a much
larger contributor to the top line -- fell 3.1% to $6.54
billion.
Rite Aid shares, which have gained 8% so far this year, edged
0.3% lower premarket to $8.45.
Write to Anne Steele at Anne.Steele@wsj.com
(END) Dow Jones Newswires
December 23, 2016 02:48 ET (07:48 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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