Wider Losses and Dim Outlook at Rite Aid

Rite Aid announced Thursday its fiscal-second quarter loss was greater than expected, and lowered its guidance for the year. Net losses increased to $69.6 million (-$0.10/share) from last year's loss of $330,000 (-$0.02/share). Revenues were $6.8 billion, a healthy 54% increase over last year's $4.29 billion. Despite the increased margins and higher revenues, the company blamed weak earnings on higher costs for interest, integration, depreciation and amortization, and a one time financing charge of $12.9 million. Analysts predicted a loss of $0.06/share, not including the financing charge, and revenues of $6.8 billion. Same-store sales were up 1.1%. CEO Mary Sammons said, "The customer just generally speaking is a little more cautious in terms of purchasing with everything going on out there from an economy point of view" (see full earnings call transcript). With those ideas in mind, Rite Aid slashed its outlook. For the year, Rite Aid now expects to lose $78 million - $161 million, compared to earlier predictions of a loss of $47 million - $129 million. Same-store sales are now expected to rise 1.3 percent - 3.3 percent this year, down from a previous estimate of 3.7 percent - 5.8 percent. Rite Aid shares were down 4.5% in mid-afternoon trading Thursday.

Sources: Forbes, Bloomberg
Commentary: Is Rite Aid Heading in the Right Direction? • Drugstore Stocks: Walgreen and CVS Stand Above the Rest
Stocks/ETFs to watch: RAD. Competitors: WAG, CVS. ETFs: IHF, XLV

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