Rite Aid Same Store Sales Gets Pressure From Generics

rite-aidRite Aid Corp has just reported that sales figures came in well below Wall Street estimates in its second quarter, largely due to pressure from pharmacy reimbursement rates and generic drugs.

Indeed, the report showed same-store sales have fallen 2.5 percent in this quarter, year over year. While there is a 0.1 percent increase in retail sales, this was majorly offset by a 3.6 percent decrease in pharmacy sales. Rite Aid Corp said that new generic drugs—of course, generally cheaper but also typically less profitable—are, in fact, responsible for this decrease in pharmacy revenue. The company also made sure to note a “challenging reimbursement-rate environment.”

Overall, Rite Aid reported a profit of $14.8 million. This is the equivalent of about 1 cent per share, on a per-share basis, compared against a profit of $21.5 million—the equivalent of about 2 cents per share—from last year. Excluding some variables, the adjusted per-share earnings fell from 6 cents per share last year to 3 cents per share, this year.
In addition, Rite Aid reported that revenue rose 4.8% to reach $8 billion year-over-year; which may sound great, but analysts were looking for a little more: $8.2 billion.

Accordingly, Rite Aid CEO John Standley said, “In the second quarter, we continued to drive positive results in our pharmacy services segment…and had strong performance in our front-end business.”
He also goes on to say, “We also saw improvements in prescription drug costs, but these improvements were more than offset by the challenging reimbursement rate environment, which we expect to continue through the remainder of the fiscal year.”

With this announcement, shares of Rite Aid took a slight bump—up about 0.4 percent—in premarket trading, on Thursday morning. Shares hit, then, $8.14 within a 52-week range of $5.88 to $8.74. This is quite notable, though, because Walgreens is actually paying $9 per share to acquire Rite Aid. And because of that, Rite Aid had said that it would not update or issue any guidance for the 2017 fiscal year, during the merger process.
And with all that in mind, analysts are now looking to see the third fiscal quarter EPS at $0.06 with revenues of $8.37 billion; the full year consensus estimates EPS to be at $0.16 with revenues of $32.97 billion.

Leave a Reply

Your email address will not be published. Required fields are marked *