Rite Aid's CEO Discusses Q3 2012 Results - Earnings Call Transcript

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Rite Aid (RAD)

Q3 2012 Earnings Call

December 15, 2011 8:30 am ET

Executives

Frank G. Vitrano - Chief Administrative Officer, Chief Financial Officer and Senior Executive Vice President

John T. Standley - Chief Executive Officer, President, Director and Member of Executive Committee

Matt Schroeder - Group Vice President of Strategy & Investor Relations and Treasurer

Analysts

Karru Martinson - Deutsche Bank AG, Research Division

John Heinbockel - Guggenheim Securities, LLC, Research Division

Mary Ross Gilbert - Imperial Capital, LLC, Research Division

Emily E. Shanks - Barclays Capital, Research Division

Karen Eltrich - Goldman Sachs Group Inc., Research Division

Mark Wiltamuth - Morgan Stanley, Research Division

Steven Valiquette - UBS Investment Bank, Research Division

Matthew J. Fassler - Goldman Sachs Group Inc., Research Division

Edward J. Kelly - Crédit Suisse AG, Research Division

Bryan C. Hunt - Wells Fargo Securities, LLC, Research Division

Presentation

Operator

Good morning. My name is Cassandra, and I will be your conference operator today. At this time, I would like to welcome everyone to the Rite Aid Third Quarter Fiscal 2012 Conference Call. [Operator Instructions] And now, I would like to turn the call over to Matt Schroeder. You may begin.

Matt Schroeder

Thank you, Cassandra, and good morning, everyone. We welcome you to our third quarter conference call. On the call with me are John Standley, our President and Chief Executive Officer; and Frank Vitrano, our Chief Financial and Chief Administrative Officer. On today's call, John will give an overview of our third quarter results and discuss our business, Frank will discuss the key financial highlights and fiscal 2012 outlook and then we will take questions.

As we mentioned in our release, we're providing slides related to the material we will be discussing today, including annual earnings and sales guidance, on our website, www.riteaid.com, under the Investor Relations Information tab for conference calls. This guidance is a point-in-time estimate made early in the fiscal quarter. The company expressly disclaims any current intention to update it.

This conference call and the related slides will be available on the company's website until the next earnings call, unless the company withdraws them earlier, and should not be relied upon thereafter. We will not be referring to the slides directly in our remarks but hope you will 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 uncertainties that can cause actual results to differ. These risks and uncertainties are described in our press release, in Item 1A of our most recent annual report on Form 10-K and in other documents we file or furnish to the Securities and Exchange Commission. Also we'll be using a non-GAAP financial measure. The definition of a non-GAAP financial measure, along with the reconciliations to the related GAAP measure, are described in our press release.

With these remarks, I'd now like to turn it over to John.

John T. Standley

Thank you, Matt, and thank you, everyone, for joining us this morning to review our fiscal 2012 third quarter results. It is really exciting to see the hard work and effort of our store, distribution and office associates driving our results. Our team's focus on our key initiatives grew our same-store sales and adjusted EBITDA and reduced our net loss compared to a year ago. In fact, our team's efforts have now grown same-store sales and adjusted EBITDA for 4 consecutive quarters.

Based on our strong third quarter results, we are raising our adjusted EBITDA guidance. Frank will provide more details about third quarter results and fiscal 2012 guidance in a few minutes. One of the most important initiatives for this quarter was our immunization program. We had over 11,000 certified immunizing pharmacists in place by the time our flu immunization campaign kicked off in August, giving us the ability to offer flu shots at every Rite Aid pharmacy for the first time in our company's history. As a result of this well-planned and executed program, we administered 1.4 million flu shots to date, more than doubling the 675,000 shot last year, which helped us grow our same-store script count and pharmacy sales. We're also on pace to achieve our goal of administering more than 1.5 million flu shots this year.

Our customer loyalty program, wellness+, continues to be an enormous success, thanks to the program's robust reward structure and the overall Rite Aid's team commitment to making sure our customers know what wellness+ has to offer. We now have more than 47 million customers enrolled in the program, of which, 74% used their card in the last 26 weeks and 54% used their card more than once in the last 26 weeks. As we continue to accumulate more trend in usage data, we will further explore additional opportunities to build our relationship with our most loyal and active users, as well as better understand how they are engaging with our loyalty program. In the meantime, we're excited about the opportunity to attract even more members and drive more utilization as we launch new rewards features on January 1. On that date, wellness+ members can begin taking advantage of the new Load2Card coupon management tool, which allows customers to download online coupons directly to the wellness+ card and have the amount automatically deducted when they present their card to purchase the items in our stores. This feature is unique and the first of its kind in the drugstore industry. In addition, members will be able to choose their wellness reward, such as a membership to well-known national fitness center or gym, a magazine subscription to one of the top health or fitness publications or a customized health screening when they earn 500 points and achieve Silver tier status. We believe wellness+ is the strongest rewards program in our industry and are committed to making it even better while finding ways to deliver more value to our most loyal customers.

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