Rite Aid Q1 Adj. Profit Tops View, Trims 2016 EPS Outlook

(RTTNews) - Retail drugstore chain operator Rite Aid Corp. (RAD) reported Thursday a profit for the first quarter that more than halved from last year, despite improved margins and revenue growth, hurt by costs related to the EnvisionRx acquisition.

Stripping down the costs, adjusted earnings per share topped analysts' expectations by a penny, while quarterly revenues matched their estimates. The company also trimmed earnings forecast for the full-year 2016, while maintaining annual sales outlook.

"Our first-quarter results reflect the continued progress we're making in positioning Rite Aid for growth, including increases in same-store sales, same-store prescription count and Adjusted EBITD. We generated these positive results while also making significant strategic investments to continue our transformation into a retail healthcare company," Chairman and CEO John Standley said.

The Camp Hill, Pennsylvania-based company reported net income of $18.84 million or $0.02 per share for the first quarter, lower than $41.45 million or $0.04 per share in the prior-year quarter.

Excluding $0.02 per share of EnvisionRx acquisition related expenses, adjusted net income for the latest quarter would have been $0.04 per share.

On average, 11 analysts polled by Thomson Reuters expected the company to report earnings of $0.03 per share in the quarter. Analysts' estimates typically exclude special items.

Revenues for the quarter grew 2.8 percent to $6.65 billion from $6.47 billion in the same quarter last year, and matched eleven Wall Street analysts' consensus estimate of $6.65 billion. The growth in sales was attributable to a 2.9 percent increase in same store sales.

Same store sales growth consists of a 0.6 percent increase in the front end sales and a 3.9 percent rise in the pharmacy sales.

Pharmacy same store sales included about 165 basis points negative impact from new generic introductions. The number of prescriptions filled in same stores increased 1.6 percent. Prescription sales contributed to 60.1 percent of total sales, and third party prescription sales represented 97.7 percent of pharmacy sales.

Gross profit for the first quarter was $1.86 billion, up from $1.80 billion in the year-ago quarter, while gross margin percentage improved 8 basis points to 27.97 percent from last year.

During the first quarter, Rite Aid opened relocated two stores, remodeled 108 stores, expanded one store, and closed four stores. At the end of the quarter, the company operates 4,566 stores in 31 states and the District of Columbia.

Looking ahead to fiscal 2016, the company now expects earnings in a range of $0.14 and $0.22 per share, down from the prior forecast range of $0.19 to $0.27 per share. However, the company continues to project annual drug store sales between $26.9 billion and $27.4 billion, and same store sales growth of 2.5 to 4.5 percent.

Street is currently looking for full-year 2016 earnings of $0.26 per share on revenues of 27.26 billion.

The company said the guidance reflects the expected results of EnvisionRx for the period subsequent to the transaction close, which is expected to occur by the beginning of July.

"Through initiatives like adding RediClinics to Rite Aid stores, launching the ground-breaking wellness+ with Plenti program and our pending acquisition of EnvisionRx, we remain highly focused on delivering a differentiated experience to our customers and a higher level of care to the communities we serve," Standley added.

RAD closed Wednesday's regular trading session at $8.92, down $0.08 on a volume of 25.66 million shares. In the past 52-week period, the stock has been trading in a range of $4.42 to $9.07.