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Rite Aid Corporation (RAD)
F3Q10 Earnings Call
December 17, 2009; 8:30 am ET
Mary Sammons - Chairman & Chief Executive Officer
John Standley - President & Chief Operating Officer
Frank Vitrano - Chief Financial Officer & Chief Administrative Officer
Chris Hall - Investor Relations
John Heinbockel - Goldman Sachs
Ed Kelly - Credit Suisse
Bryan Hunt - Wells Fargo Securities
Emily Shanks - Barclays Capital
Karu Martesen - Deutsche Bank
Mary Gilbert - Imperial Capital
[Michael Schabacker - Long Baker]
[Colleen Burns] - Oppenheimer & Co.
Previous Statements by RAD
» Rite Aid F2Q10 (Qtr End 8/29/09) Earnings Call Transcript
» Rite Aid Corporation F1Q10 (Qtr End 05/30/09) Earnings Call Transcript
» Rite Aid Corporation F4Q09 (Qtr End 2/28/09) Earnings Call Transcript
I’ll now turn the conference over to Mr. Chris Hall; please go ahead sir.
Thank you, Crystal and good morning everyone. We welcome you to our third quarter conference call. On the call with me are Mary Sammons, our Chairman and CEO; John Standley, our President and Chief Operating Officer; and Frank Vitrano, our Chief Financial and Chief Administrative Officer.
On today’s call, Mary will give an overview of our third quarter results, Frank will discuss the key financial highlights in fiscal 2010 outlook. John will discuss our business and then we will take questions.
As we mentioned in our release, we are providing slides related to the material we will be discussing today on our website, www.riteaid.com under the Investor Relations information tab for conference calls. We will not be referring to them directly in our remarks, but hope you’ll find them helpful as they summarize some of the key points made on the call.
Before we start, I’d like to remind you that today’s conference call includes certain forward-looking statements. These forward-looking statements are made in the context of certain risks and uncertainty that can cause results to differ. Also we will be using a non-GAAP financial measure.
The definitions of the non-GAAP financial measure along with the reconciliations to related GAAP measures are described in our press release. I’d also like to encourage you to reference our SEC filings for more detail.
With these remarks I’d now like to turn it over to Mary.
Thanks, Chris and good morning everyone. Thanks for joining us and happy holidays. As you can see from our release this morning, we continue to make progress on many of our key initiatives. We are in a much stronger financial position today than a year ago with more than 900 million of liquidity at quarter end and the refinancing of all of our September 2010 debt maturities completed in October.
With strong liquidity and no major debt coming during into late 2012, we cannot only weather the current economic storm, but improve our results long term with the growth and profit strategies we have identified. As for the quarter, net loss decreased significantly and we delivered adjusted EBITDA similar to last years number even with lower front-end sales and continued pressure on pharmacy margins.
Our team did a great job combating those headwinds by operating more efficiently and even though we held tight on expenses, customer satisfaction ratings in both the pharmacy and front-end were substantially higher than last years third quarter. As our store associates made good use of scheduling and replenishment tools as well as increased personal service.
Our renewed focus on making Rite Aid a better place to work, and as a result a better place to shop is having a positive impact. The economy, the 10% unemployment rate and the increasingly competitive environment continue to hurt front-end sales, as customers search for bargains and cut back on discretionary items. This shift in behavior affected all of the major events in the quarter, including the finish to back-to-school, Halloween and Black Friday.
Customers are likely to be more cautious with their holiday spending to, making it even more important for us to continue to emphasize value. Our stepped up commitment to Rite Aid brand keeps paying off, too, with sales growing substantially as a percent of front-end sales again in the third quarter.
Our marketing and merchandising features special promotions like our gift of savings holiday program, which are drawing more customers than last year, and we rolled out new in store signage that highlights special buyers and customer savings. Our pharmacy teams once again increased the numbers of prescriptions filled by 1.4% this quarter, helping to offset some of the pharmacy margin rate decrease.
Our RX Savings Card now with over 4.3 million unique users, are stepped up compliance programs including automated courtesy resale and targeted prescription growth programs for under performing stores contributed to the growth and our pharmacists continue to help our patients save money as our generic dispense rate grew again to almost 71%.
Our nearly 2,000 immunizing pharmacists were busy during the quarter, too administering 84% more flu shots than last year, with heavy demand that started in early September, slowing only because of a nationwide storage of regular flu vaccine by the second half of October.
We received a substantial number of doses since then, so if demand for regular flu vaccine picks up after the holidays, we’re ready. As for H1N1, select Rite Aid pharmacies in 13 states have received the vaccine, and most are stem in stock as availability continues to increase.
In mid October, we launched our new loyalty program called wellness+. In four test markets, supporting it with a comprehensive marketing plan that included TV and radio advertising and while we’ve been in those markets for only about two months now, I’m pleased to report, our new tiered benefit customer rewards program is doing very well in test. John will be give you more details later.