Drugstore operator Rite Aid Corp. said Wednesday it narrowed its fiscal first-quarter loss by closing stores and trimming costs, but it expects a greater deficit for the year because of refinancing expenses.
The Camp Hill, Pa., company lost $98.4 million, or 11 cents per share, compared with $156.6 million, or 20 cents per share, a year ago. Revenue fell 1 percent to $6.53 billion from $6.61 billion due to 86 store closings.
Analysts expected a loss of 13 cents per share and revenue of $6.55 billion for the quarter ended May 30, according to Thomson Reuters.
In morning trading, Rite Aid shares added 10 cents, or 7.9 percent, to $1.36.
Rite Aid said same-store sales grew 0.6 percent, while prescriptions filled rose 2.2 percent. A key measurement of retailer health, same-store sales measure results only at stores open for at least one year. In those stores, pharmacy revenue grew 1.6 percent and front-end sales, which includes items like cosmetics and food, fell 1.6 percent. Rite Aid got 68.2 percent of its revenue from its pharmacies.
At “core” Rite Aid locations, same-store sales improved 1.5 percent, as pharmacy sales rose 3.1 percent and front-end sales fell 1.4 percent. At former Brooks Eckerd stores, same-store revenue was down 1.3 percent, as same-pharmacy revenue fell 1.1 percent and nonpharmacy revenue fell 2 percent.
Rite Aid bought 1,850 Brooks Eckerd stores in June 2007 for $2.36 billion, but sales at those stores have been weaker than at its older stores. The company said the decline in sales at Brooks Eckerd stores is slowing due to greater sales of store-brand merchandise and increased prescriptions for generic drugs. It said sales could begin to improve in the coming months.
However it said overall nonpharmacy revenue continued to slump in June, with sales of seasonal items faring the worst.
The Brooks Eckerd acquisition saddled the company with debt, but Rite Aid says it was able to make its most significant debt reductions in two years during the past quarter. To reduce expenses, Rite Aid is seeking rent concessions from landlords of hundreds of underperforming stores. It has shifted some salaried jobs to hourly wages and is shipping products to poorly performing stores only every other week.
The company cut its selling, general and administrative expenses by about $82 million, to $1.71 billion. Cost of goods sold decreased about $47 million, to $4.76 billion.
Rite Aid is refinancing loans that come due in September. The company said it completed refinancing of a $145 million term loan, and has partly completed refinancing for its $1.75 billion revolving credit facility. It now has a $525 million term loan due in June 2015, and $410 million in senior notes due June 2016, and says it secured commitments for $960 million of a proposed $1 billion revolving credit facility due September 2012.
Due to the refinancing, Rite Aid said its interest costs will increase by $55 million for the year, or about 7 cents per share. That will result in an annual loss of $265 million to $490 million, or 33 cents to 59 cents per share. The company previously expected a smaller loss of $210 million to $435 million, or 26 cents to 53 cents per share, although its earlier estimate due not include interest expenses.
Rite Aid still expects $26.3 billion to $26.7 billion in revenue in fiscal 2010, and still says same-store sales will rise 0.5 percent to 2.5 percent. Analysts expect a loss of 42 cents per share and revenue of $26.3 billion for the year.
Rite Aid runs 4,825 stores in 31 states and the District of Columbia. During the quarter it closed 86 stores, opened 10, relocated 17 and remodeled three. The company said earlier this year that it would close up to 117 stores by the end of February 2010. It has closed 179 stores over the last year.
Copyright 2009 The Associated Press.
