Rite Aid Corporation ( RAD - Analyst Report ) , the third-largest retail drugstore in the U.S. based on revenues and number of stores, is scheduled to report its first-quarter 2013 financial results on Thursday, June 21, 2012. The Zacks Consensus Estimate projects a loss of 4 cents per share for the first quarter with projected revenues of $6,467 million.

With respect to earnings surprises, Rite Aid has a history of missing as well as topping the Zacks Consensus Estimate in the trailing four quarters. The company’s surprise history ranges from negative 41.7% to positive 50.0%, with an average surprise of positive 22.9%. Of the trailing four quarters, Rite Aid has surpassed the Zacks Consensus Estimate in the earlier three quarters, while missing in the recently passed quarter.

Looking Back at Fourth-Quarter 2012

The drugstore chain operator posted an adjusted loss per share of 4 cents, which not only improved from the prior-year loss of 24 cents, but also outpaced the Zacks Consensus Estimate loss of 12 cents a share. Growth in same-store sales and reduced selling, general & administrative (SG&A) expenses had a positive influence on recent results.

Rite Aid's revenues came in at $7,146.8 million for the quarter compared with $6,456.5 million in the prior-year period. An increase of approximately 10.7% was mostly attributable to growth in same-store sales and an additional week in the quarter, partially offset by store closings. Same-store sales for the quarter increased 3%. Moreover, total revenue edged past the Zacks Consensus Estimate of $7,100 million.

Fiscal 2013 Outlook

Rite Aid expects fiscal 2013 revenues to be between $25.4 billion and $25.8 billion based on same-store sales increase of flat to 1.5%. Currently, net loss is expected to be in the range of $103 million to $267 million (or 13 cents to 31 cents per share).

First Quarter Sales Results So Far

Thus far in the first quarter of fiscal 2013, Rite Aid has posted robust monthly sales results. The company’s same-store sales (comps) for the one month ended April 28, 2012, rose 2.9%, based on strong front-end, pharmacy and prescription count comps for the month. Total drugstore sales in April were $1.993 billion, representing a 2.5% rise from the year-ago level of $1.945 billion.

For the five-week period ended June 2, 2012, the company’s comps increased 1.1%, while total drug store sales grew 0.3% to $2.454 billion, up from the year-ago level of $2.446 billion.

Agreement of Estimates

Despite positive sales results so far in the first quarter, 2 out of 5 analysts, increased their loss forecast, while none moved their estimates in the positive territory in the last 30 days. For full fiscal 2013, 1 analyst downwardly revised estimates, while none of the analysts revised in the opposite direction over the last 30 days.

Magnitude of Estimate Revisions

Negative earnings revisions by analysts in the last 30 days increased the Zacks Consensus Estimate of a loss by a penny each for the first-quarter and fiscal 2013 to 4 cents and 20 cents per share, respectively.

Our Recommendation

Of late, Rite Aid has also been focusing on improving store-level performance, as part of its turnaround strategy. Apart from initiating programs like the Wellness+ program for diabetes and the Flu Immunization program, the company is implementing various cost-cutting initiatives to improve its near-term as well as long-term profitability.

Rite Aid is working toward expanding its generic drug portfolio in order to boost its top line as well as market share. Generally, generic (non-brand) drugs are less expensive but generate higher gross margin. Rite Aid’s positioning as the third largest retail drugstore in the U.S. -- based on revenues and number of stores -- provides it an edge over its competitors to accomplish this goal.

However, the company’s peer Wal-Mart Inc’s ( WMT - Analyst Report ) foray into the retail generic drug market is exerting pressure on Rite Aid’s pharmacy margin. Moreover, an increased debt burden resulting from the acquisition of Brooks Eckerd has limited the scope of additional finance.

Rite Aid currently holds a Zacks #3 Rank, implying a short-term Hold rating on the stock. The company retains a long-term Neutral recommendation on the stock.