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Rite Aid (RAD) Misses Q1 Earnings Estimates, Sales Pick Up
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Rite Aid Corporation , which is on track to acquire rival Walgreens Boots Alliance Inc. (WBA - Free Report) , reported adjusted earnings of 1 cent a share in the first quarter of fiscal 2017, short of the Zacks Consensus Estimate of 5 cents and down 50% from the year-ago figure of 2 cents. The bottom line miss is mainly attributed to fall in adjusted EBITDA, offset by lower taxes and interest expense.
During the quarter, the company was encouraged by the performance of its Pharmacy Services segment as well as its front-end business. Moreover, the company displayed excellent expense control that drove results. However, the company stated that challenges relating to the pharmacy reimbursement rate pressured the results as its drug purchasing efficiencies were short of expectations.
Though the company expects drug cost reductions to remain below expectations in the near term, it expects this trend to improve in the second half of the fiscal.
The company witnessed a 23.1% jump in total revenue to $8,184.2 million and surpassed the Zacks Consensus Estimate of $8,179 million. During the quarter, the company’s top line gained from strength in both Retail Pharmacy and Pharmacy Services segments.
Deeper Insight
Sales at the Retail Pharmacy Segment rose 0.4% to $6,675.5 million, primarily due to an increase in comparable store sales (comps). Sales at the Pharmacy Services segment, which was acquired on Jun 24, 2015, were $1,602.4 million.
The company’s comps inched up 0.4%, owing to respective increases of 1.2% in front-end and 0.1% in pharmacy comps, wherein pharmacy comps included a negative impact of 198 basis points (bps) due to the introduction of new generic drugs. Also, prescription count at comparable stores improved 0.6%. Prescription sales constituted 68.9% of total drugstore sales and third-party prescription sales accounted for 98% of pharmacy sales
Rite Aid’s adjusted EBITDA fell 4.4% year over year to $286 million, whereas adjusted EBITDA margin contracted 100 bps to 3.5%. The decline in adjusted EBITDA, in dollar terms, was mainly due to a fall in adjusted EBITDA contributions from Retail Pharmacy segment owing to lower pharmacy margin as a fall in reimbursement rates was not offset by purchasing efficiencies and script count growth. This was slightly compensated by strong contribution from the Pharmacy Services segment
Financials
Rite Aid, which trails CVS Health Corporation (CVS - Free Report) in size, ended the fiscal first quarter with cash and cash equivalents of $144.8 million, long-term debt (excluding current maturities) of $6,899 million, and total shareholders’ equity of $591.5 million.
In first quarter fiscal 2017, the company generated cash flow of $159.9 million from operating activities and incurred gross capital expenditure of nearly $124.6 million.
Store Update
Rite Aid stores continue to renovate, with 79 outlets remodeled and 4 relocated in the fiscal first quarter. Additionally, the company opened four stores. This brings the company’s total wellness stores count to 2,126. Further, the company acquired one store and shut six stores during the reported quarter. With this, Rite Aid operates 4,560 stores across 31 states and the District of Columbia as of May 28, 2016. Also, the company opened two clinics, taking its total clinics count to 80.
Zacks Rank
Rite Aid currently carries a Zacks Rank #3 (Hold). A better-ranked stock in the broader retail sector is Herbalife Ltd. (HLF - Free Report) , with a Zacks Rank #2 (Buy).
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Rite Aid (RAD) Misses Q1 Earnings Estimates, Sales Pick Up
Rite Aid Corporation , which is on track to acquire rival Walgreens Boots Alliance Inc. (WBA - Free Report) , reported adjusted earnings of 1 cent a share in the first quarter of fiscal 2017, short of the Zacks Consensus Estimate of 5 cents and down 50% from the year-ago figure of 2 cents. The bottom line miss is mainly attributed to fall in adjusted EBITDA, offset by lower taxes and interest expense.
During the quarter, the company was encouraged by the performance of its Pharmacy Services segment as well as its front-end business. Moreover, the company displayed excellent expense control that drove results. However, the company stated that challenges relating to the pharmacy reimbursement rate pressured the results as its drug purchasing efficiencies were short of expectations.
Though the company expects drug cost reductions to remain below expectations in the near term, it expects this trend to improve in the second half of the fiscal.
RITE AID CORP Price, Consensus and EPS Surprise
RITE AID CORP Price, Consensus and EPS Surprise | RITE AID CORP Quote
The company witnessed a 23.1% jump in total revenue to $8,184.2 million and surpassed the Zacks Consensus Estimate of $8,179 million. During the quarter, the company’s top line gained from strength in both Retail Pharmacy and Pharmacy Services segments.
Deeper Insight
Sales at the Retail Pharmacy Segment rose 0.4% to $6,675.5 million, primarily due to an increase in comparable store sales (comps). Sales at the Pharmacy Services segment, which was acquired on Jun 24, 2015, were $1,602.4 million.
The company’s comps inched up 0.4%, owing to respective increases of 1.2% in front-end and 0.1% in pharmacy comps, wherein pharmacy comps included a negative impact of 198 basis points (bps) due to the introduction of new generic drugs. Also, prescription count at comparable stores improved 0.6%. Prescription sales constituted 68.9% of total drugstore sales and third-party prescription sales accounted for 98% of pharmacy sales
Rite Aid’s adjusted EBITDA fell 4.4% year over year to $286 million, whereas adjusted EBITDA margin contracted 100 bps to 3.5%. The decline in adjusted EBITDA, in dollar terms, was mainly due to a fall in adjusted EBITDA contributions from Retail Pharmacy segment owing to lower pharmacy margin as a fall in reimbursement rates was not offset by purchasing efficiencies and script count growth. This was slightly compensated by strong contribution from the Pharmacy Services segment
Financials
Rite Aid, which trails CVS Health Corporation (CVS - Free Report) in size, ended the fiscal first quarter with cash and cash equivalents of $144.8 million, long-term debt (excluding current maturities) of $6,899 million, and total shareholders’ equity of $591.5 million.
In first quarter fiscal 2017, the company generated cash flow of $159.9 million from operating activities and incurred gross capital expenditure of nearly $124.6 million.
Store Update
Rite Aid stores continue to renovate, with 79 outlets remodeled and 4 relocated in the fiscal first quarter. Additionally, the company opened four stores. This brings the company’s total wellness stores count to 2,126. Further, the company acquired one store and shut six stores during the reported quarter. With this, Rite Aid operates 4,560 stores across 31 states and the District of Columbia as of May 28, 2016. Also, the company opened two clinics, taking its total clinics count to 80.
Zacks Rank
Rite Aid currently carries a Zacks Rank #3 (Hold). A better-ranked stock in the broader retail sector is Herbalife Ltd. (HLF - Free Report) , with a Zacks Rank #2 (Buy).
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