Wednesday, December 15, 2010

Rite Aid Corp. (NYSE: RAD): Q3 Earnings Preview 2011

Rite Aid Corp. (NYSE: RAD), the third-largest drugstore chain, is scheduled to release third quarter earnings before the opening bell on Thursday, December 16, 2010. Analysts, on average, expect the company to report a loss of 13 cents per share on revenue of $6.20 billion. In the year ago quarter, the company posted a loss of 10 cents per share on revenue of $6.35 billion.

Rite Aid Corporation, through its subsidiaries, operates retail drugstores. Its drugstores primarily provide pharmacy services. The company sells prescription drugs and front-end products. The drug retailer has lost money in each quarter since its June 2007 acquisition of Brooks & Eckerd as it is still struggling with integration issues. The company operates 4,700 stores in 31 states and the District of Columbia. 

In the preceding second quarter, the Camp Hill, Pennsylvania-based company's net loss was $199.3 million, or 23 cents a share, compared to a loss of $120.4 million, or 14 cents a share, in the year-earlier quarter. Revenue dropped to $6.16 billion from $6.32 billion in the same quarter last year. Analysts, on average, expected the company to post a loss of 16 cents per share on revenue of $6.21 billion. 

At its last earnings call in September, the company lowered its fiscal 2011 financial guidance. Rite Aid anticipates net loss in a range of $400 million to $590 million or 46 cents and 67 cents per share, wider than the prior outlook for a loss of $355 million to $570 million or 41 cents and 65 cents per share. The company expects $25 billion to $25.4 billion in sales, down from its previous forecast of $25.2 billion to $25.6 billion.Same store sales for fiscal 2011 in currently expected to range from a decrease of 1.5% to being flat. Earlier, the company projected same store sales to range between a a decrease of 1% to an increase of 1%. The company expects to open three net new stores and relocate 30 stores. The guidance includes a total of 80 closures.

The company has reported decrease in same-store sales during the each month of the quarter.  It reported a 1.3% decline in its November same-store sales. In October, same store sales dropped 1.7% while in September, same store sales fell 0.9%.

Early in December, the company said that its third-quarter same store sales fell 1.3%, hurt by flat front-end sales and a 1.9% drop in pharmacy sales.

The company has been closing stores and cutting debt in response to poor corporate performance, but these moves haven't proved fruitful so far. Rite Aid's trouble has been compounded by intense competition from its larger rivals, Walgreen (NYSE: WAG) and CVS (NYSE: CVS), as they continue to add stores to their chains. Rite Aid's name has often turned up in various bankruptcy risk list. The turnaround still remains elusive and the company has been struggling to integrate Brooks & Eckerd. 

Rite Aid expects its various sales initiatives - like a new wellness and customer loyalty program, along with immunization training to aid a number of Rite Aid pharmacists providing vaccinations - to help drive company sales in the long term.

In terms of stock performance, Rite Aid shares have lost nearly 38% since the beginning of the year.

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