Post Earnings Coverage as Rite Aid Top- and Bottom-line Below Market Expectations

Upcoming AWS Coverage on Walgreens Boots Alliance

LONDON, UK / ACCESSWIRE / January 5, 2017 / Active Wall St. announces its post-earnings coverage on Rite Aid Corp. (NYSE: RAD). The Company reported its third quarter fiscal 2017 financial results on December 22, 2016. The drugstore chain posted a 75% drop in earnings in a “difficult” environment, as the Company awaits acquisition by Walgreens Boots Alliance, Inc. Register with us now for your free membership at: http://www.activewallst.com/register/.

One of Rite Aid’s competitors within the Drug Stores space, Walgreens Boots Alliance, Inc. (NASDAQ: WBA), is expected to report earnings on January 05, 2017 before market open. AWS will be initiating a research report on Walgreens Boots Alliance in the coming days.

Today, AWS is promoting its earnings coverage on RAD; touching on WBA. Get our free coverage by signing up to:

http://www.activewallst.com/registration-3/?symbol=RAD

http://www.activewallst.com/registration-3/?symbol=WBA

Earnings Reviewed

For the three months ended November 26, 2016, Rite Aid reported revenues of $8.09 billion compared to revenues of $8.15 billion in Q3 FY16, a decrease of $64.5 million or 0.8%. The Company’s revenue number came in below the market expectations of $8.23 billion.

For Q3 FY17, revenue from the Company’s Retail Pharmacy segment totaled $6.5 billion, down 3.1% compared to the prior year’s same period, primarily as a result of a decrease in same store sales. Revenues in the Company’s Pharmacy Services segment were $1.6 billion, increasing 9.7% compared to the prior year’s corresponding period.

For Q3 FY17, Rite Aid’s same store sales fell 3.4% over the prior year, consisting of a 4.7% decrease in pharmacy sales and a 0.4% decrease in front-end sales. Pharmacy sales included an approximate 182 basis point negative impact from new generic introductions. The number of prescriptions filled in same stores decreased 2.4% over the prior year’s comparable period. Prescription sales accounted for 68.9 of Rite Aid’s total drugstore sales, and third party prescription revenue was 98.2% of pharmacy sales.

For Q3 FY17, Rite Aid generated net income of $15.0 million, or $0.01 per diluted share, compared to net income of $59.5 million, or $0.06 per diluted share, for Q3 FY16. Excluding certain items, Rite Aid posted adjusted earnings of $0.02 per share from $0.08 per share in Q3 FY16. These numbers came in below Wall Street’s expectations of $0.04 per share.

During the reported quarter, the Company’s adjusted EBITDA totaled $274.1 million, or 3.4% of revenues, compared to $373.2 million, or 4.6%, for Q3 FY16. The decline in adjusted EBITDA was due to a drop of $117.5 million in the Retail Pharmacy segment, resulting from lower pharmacy gross profit and partially offset by an increase in front-end’s gross profit. Pharmacy gross profit decreased due to lower reimbursement rates and script count.

“Despite the difficult operating environment created by the extended duration of the merger process with WBA, our third quarter results show solid performance in our front-end business, good cost control and continued strong growth at our pharmacy benefit manager, EnvisionRx,” said Chairman and CEO John Standley.

Store Update

In Q3 FY17, Rite Aid opened 3 stores, relocated 9 stores, and remodeled 95 stores, bringing the total number of wellness stores chainwide to 2,322. The Company also acquired 1 store and closed 7 stores, resulting in a total store count of 4,547 at the end of Q3 FY17. Rite Aid also opened 2 clinics during the reported quarter, bringing the total to 92.

Balance Sheet

As of November 26, 2016, Rite Aid had cash and cash equivalents of $220 million and long-term debt worth $7.21 billion. In Q3 FY17, the Company reported cash flow from operating activities of $152.586 million.

Merger Update with Walgreens

On December 20, 2016, Walgreens and Rite Aid announced an agreement to sell 865 Rite Aid stores and certain assets related to store operations to Fred’s, Inc. for $950 million in an all-cash transaction. The transaction is subject to Federal Trade Commission (FTC) approval of the sale of the stores to Fred’s, FTC approval and completion of the pending acquisition of Rite Aid by WBA and other customary closing conditions.

The agreement was entered into to respond to concerns identified by the FTC in its review of the proposed acquisition of Rite Aid by WBA which was announced in October 2015. Rite Aid stated that while Wall Greens is actively engaged in discussions with the FTC regarding the transaction to complete the Rite Aid acquisition in early calendar 2017, there can be no assurance that the requisite regulatory approvals will be obtained, or that the transactions will be completed within the required time period.

Stock Performance

At the close of trading session on January 04th, 2017, Rite Aid’s share price finished at $8.27, rising 1.10%. A total volume of 15.03 million shares exchanged hands. The stock has advanced 8.96% and 11.61% in the last three months and past six months, respectively. Furthermore, since the start of the year, shares of the company have gained 0.36%. The stock is trading at a PE ratio of 96.16 and currently has a market cap of $8.71 billion.

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