Drugstore chain retailer,
Rite Aid Corporation
) came up with its sales results for May as well as the first
quarter of fiscal 2015, yesterday. Additionally, the company
outlined its preliminary earnings results for the first quarter and
based on the same, lowered its forecast for fiscal 2015.
The trimming of earnings guidance for the fiscal year shook the
shares of Rite Aid, which rolled down 7.41% on the index during
yesterday's trading session.
Rite Aid's comparable store sales (comps) for the five weeks ended
May 31, 2014 rose 3.5%. The improvement reflected an increase in
front-end and pharmacy comps as well as higher prescription count
at comparable stores.
Pharmacy comps for May were up 5.0%, which included a negative
impact of nearly 156 basis points from generic drug introduction.
Front-end comps improved by a marginal 0.5%, while prescription
count at comparable stores rose 3.2%.
Rite Aid's total drugstore sales for the month stood at $2.484
billion, up 2.5% from the year-ago figure of $2.423 billion.
Prescription sales constituted 68.0% of the total drugstore sales
while third-party prescription sales accounted for 97.4% of
Further, the nation's third largest drugstore chain in terms of
store count following
CVS Caremark Corp.
), reported a 3.1% rise in comps for first quarter fiscal 2015 (13
weeks ended May 31, 2014). The increase was driven by 4.6% growth
in pharmacy comps and 2.3% rise in prescription count at comparable
stores, while front-end comps for the quarter remained flat.
Total drugstore sales for the quarter grew 2.6% to $6.425 billion
against $6.264 billion in the year-ago comparable period.
Prescription sales constituted 68.4% of total drugstore sales.
Third-party prescription sales accounted for 97.4% of pharmacy
Rite Aid, which competes with
), also reported preliminary results for the first quarter,
projecting adjusted EBITDA in the range of $275-$285 million, net
income of about $35-$45 million and earnings per share of nearly 4
cents. The projected earnings for the quarter stand below the Zacks
Consensus Estimate of 7 cents per share.
The company also highlighted that its adjusted EBITDA for the first
quarter will trail its prior-year results as the company witnessed
higher-than-expected drug costs and reimbursement rate reductions
in the first quarter of this year. The company hopes to report
first quarter results on May 19, 2014.
Based on the company's projections for the first quarter and
anticipated reductions in generic purchase price for the rest of
the year, the company trimmed its adjusted EBITDA, net income and
earnings per share forecasts for fiscal 2015. However, it retained
its sales, comps and capital expenditure targets for the year.
The company now expects adjusted EBITDA for fiscal 2015 to range
from $1.275-$1.350 billion compared with $1.325-$1.4 billion guided
earlier. Net income forecast for the fiscal year is slashed to
$298-$408 million range versus $313.0-$423.0 million expected
earlier. As a result, full year earnings per share are now
estimated in the range of 30-40 cents as against the earlier
forecast of 31-42 cents.
Though the diminished forecast for the year is disappointing, the
company's sustained focus on expanding pharmacy and clinical
services through its Wellness+ customer loyalty program and
remodeling of wellness stores raise our hopes. We believe that such
measures will enable the company to broaden its customer base and
boost top- and bottom-line performances. Rite Aid currently has a
Zacks Rank #1 (Strong Buy).
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