Rite Aid Corporation
(
RAD
), the third-largest retail drugstore in the U.S. based on revenues
and number of stores, posted a fourth-quarter 2012 loss last
Thursday. Though the company's results slumped in the quarter, it
compared favorably with the Zacks Consensus Estimate and registered
a vast improvement from last year.
Citing a considerable improvement in the company's prospects and
forward guidance update, the analysts have turned a little hopeful
expecting Rite Aid's losses to decline in future. In the subsequent
paragraphs, we will cover the recent earnings announcement,
analysts' estimate revisions as well as the Zacks Rank and
long-term recommendation on the stock.
Earnings Results at a Glance
Rite Aid Corp. posted a net loss of approximately $161.3 million
in the fourth quarter of fiscal 2012, marking an improvement from a
loss of $205.7 million in the year-ago period.
The quarterly adjusted loss per share came in at 4 cents, which
not only improved from the prior-year loss of 24 cents, but also
outpaced the Zacks Consensus Estimate loss of 12 cents a share.
Growth in same-store sales and reduced selling, general &
administrative (SG&A) expenses had a positive impact on the
recent results. On a reported basis, including LIFO charges, the
company incurred a loss of 18 cents per share.
Rite Aid's revenues came in at $7,146.8 million for the quarter
compared with $6,456.5 million in the prior-year period. An
increase of roughly 10.7% was mainly attributable to growth in
same-store sales and an additional week in the quarter, partially
offset by store closings. Same-store sales for the quarter
increased 3%. Moreover, total revenue edged past the Zacks
Consensus Estimate of $7,100 million.
Guidance
Going forward, Rite Aid expects fiscal 2013 revenues to be
between $25.4 billion and $25.8 billion based on same-store sales
increase of flat to 1.5%. Currently, net loss is expected to be in
the range of $103 million to $267 million (or 13 cents to 31 cents
per share).
(Read our full coverage on this earnings report:
RAD Beats, Mixed Outlook for FY13
)
Agreement of Estimate Revisions
Estimate revision trend for the upcoming first quarter of fiscal
2013 tilts slightly to the positive side, with analysts projecting
diminished losses for the company. Over the last 7 days, 2 out of 4
analysts revisited their estimates for the first quarter in the
positive direction while none made negative revisions. For the
second quarter, analysts' sentiment remained neutral with 1 out of
4 analysts making positive revision and 1 another making a negative
revision.
For fiscal 2013, estimate revision trends showed a positive
sentiment among most of the analysts covering the stock. Over the
last 7 days, 4 out of 5 analysts have revised their estimate in the
positive direction with no movement in the opposite direction.
Estimate revision trends for fiscal 2014 reflect 2 out of 4
analysts revising estimates upward while none of them moved
estimates downward.
Magnitude of Estimate Revisions
Positive analyst sentiment has driven a downside in the loss
projections of the company, and thus the Zacks Consensus Estimates
for the upcoming quarters and fiscal year periods reflect shrinking
of losses. In the last 7 days, the Zacks Consensus Estimated loss
for the first quarter of 2013 came down by a penny to 3 cents per
share. The Zacks Consensus Estimate for the second quarter remained
unchanged at a loss of 10 cents per share as 1 negative revision
muted 1 positive revision.
For fiscal 2013, positive revisions pulled down the estimated
loss by 6 cents to 22 cents per share in the last 7 days. On the
other hand, the Zacks Consensus Estimated loss for fiscal 2014
moved down by 10 cents to 12 cents per share.
Our Take
In an effort to expand its pharmacy and clinical services, Rite
Aid has applied additional resources, including the Wellness+
program for diabetes and the Flu Immunization program. During the
last quarter, the company made significant progress on its
Wellness+, Flu immunization program, Wellness store remodels and
Rite Aid private brand program. We believe these programs will
enable the company to increase its customer base as well as
long-term profitability.
Moreover, the company is in the process of implementing various
cost cutting initiatives, including centralized indirect
procurement of drugs, reduction of supply chain costs, debt
reduction, etc., which will certainly boost its bottom line.
Headquartered in Camp Hill, Pennsylvania, Rite Aid operates in
31 states across the country and in the District of Columbia. As of
March 31, 2012, the company operated 4,659 stores versus 4,711
stores in the same period last year.
Rite Aid competes with
CVS Caremark Corporation
(
CVS
) and
Walgreen Co.
(
WAG
). Currently, the company holds a Zacks #2 Rank, implying a
short-term Buy rating. We retain our long-term Neutral
recommendation on the stock.
About Earnings Estimate Scorecard
As a PhD from MIT, Len Zacks proved over 30 years ago that
earnings estimate revisions are the most powerful force impacting
stock prices. He turned this ground breaking discovery into two of
the most celebrating stock rating systems in use today. The Zacks
Rank for stock trading in a 1 to 3 month time horizon and the Zacks
Recommendation for long-term investing (6+ months). These "Earnings
Estimate Scorecard" articles help analyze the important aspects of
estimate revisions for each stock after their quarterly earnings
announcements. Learn more about earnings estimates and our proven
stock ratings at
http://www.zacks.com/education
CVS CAREMARK CP (
CVS
): Free Stock Analysis Report
RITE AID CORP (
RAD
): Free Stock Analysis Report
WALGREEN CO (
WAG
): Free Stock Analysis Report
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