Rite Aid Plunges 31%, Stung by ‘Cautious Consumer’

Shares of Rite Aid (RAD) plunged more than 30% after the drugstore chain reported a larger third-quarter loss than analysts' estimated and lowered its full-year outlook. For the quarter, the company's net loss was $84.8 million ($-0.12/share) compared to a net income of $1.1 million ($-0.01/share) last year. Revenue climbed 51% to $6.52 billion, mostly from the acquisition of Brooks Eckerd. Forecasters were anticipating a net loss of $0.07/share on $6.64 billion in revenue. The company pointed to weak flu medicine sales and less demand for digital-film processing and snacks. "They mentioned a weakening consumer for a company that people thought was somewhat recession resistant," said Carla Casella, an analyst at JPMorgan Chase. "It's a little scary when they start talking about a weakening consumer. People are going to lose patience."

Rite Aid also lowered its expected fiscal year sales to $24.3-$24.6 billion from $24.5-$25.1 billion. It sees yearly earnings falling to a loss of $0.27-$0.31/share from the loss of $0.15-$0.27/share it previously anticipated. "As we look forward to the remainder of our fiscal year, like the rest of the industry, we continue to be challenged by a weaker cough, cold and flu season than last year" and "a more cautious consumer," said CEO Mary Sammons.

Rite Aid closed down 31.7% to $2.80.

Sources: Press release, RTT News, Bloomberg

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Comments

[jopocop:]

Mary Sammons was super weak in her defense of her company and own actions on Cramer's show this week. It was pitiful and inspired no confidence that truly Rite Aid will really become profitable. Before her efforts started 4-5 years ago, the stores were half-empty on things to sell. Now, there are stocked, but, she is not competitive on prices. That is the problem. The consumer will come in, but she has to undercut CVS, Costco, Walmart, and all the others. She needs market share improvement. Forget the margins for now, but get traffic and give great deals to the customers. If not, Rite Aid is the next Circuit City, if not there already. It will be BK in 2 years.

2007 Dec 23 02:33 PM