Rite Aid Q3 Profit Down 44%, But Matches View

(RTTNews) - Retail drugstore chain operator Rite Aid Corp. (RAD) on Thursday reported a 44 percent decline in profit for the third quarter from last year, as higher revenues were more than offset by costs related to the EnvisionRx acquisition and expenses related to the company's pending merger with drug store chain Walgreens Boots Alliance.

However, earnings per share for the quarter matched analysts' expectations, while quarterly revenues missed their estimates.

The decline in net income was due to lower income tax expense last year on an adjustment to the company's deferred tax valuation allowance of $45.9 million, higher interest and amortization expense on the acquisition of EnvisionRx, and transaction expenses of $9.8 million related to the company's pending merger with Walgreens Boots Alliance, Inc. or WBA.

The Camp Hill, Pennsylvania-based company's net income attributable to common stockholders for the third quarter was $59.54 million or $0.06 per share, lower than $106.21 million or $0.10 per share in the prior-year quarter.

The prior-year quarter's results benefited from adjustment to the company's deferred tax valuation allowance of $45.9 million.

On average, 10 analysts polled by Thomson Reuters expected the company to report earnings of $0.06 per share in the quarter. Analysts' estimates typically exclude special items.

Revenues for the quarter grew 21.8 percent to $8.15 billion from $6.69 billion in the same quarter last year, but missed analysts' consensus estimate of $8.18 billion.

Retail Pharmacy Segment revenues were $6.7 billion and increased 0.8 percent compared to the prior year period primarily as a result of an increase in same store sales. Pharmacy Services Segment revenues were $1.5 billion.

Same store drugstore sales for the Retail Pharmacy Segment increased 0.9 percent over the prior year, consisting of a 0.3 percent increase in front-end sales and a 1.2 percent increase in pharmacy sales.

Looking ahead, Rite Aid said that it remains comfortable with the fiscal 2016 guidance it provided on September 17, 2015. However, due to the pending merger deal with WBA, Rite Aid does not intend to provide further updates to its guidance for fiscal 2016 or to issue guidance for fiscal 2017. Rite Aid's guidance did not reflect the pending transaction with WBA.