Earnings Scorecard: Rite Aid Corp. - Analyst Blog


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.


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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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Business , Stocks

Referenced Stocks: CVS , RAD , WAG



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