Drugstore operator Rite Aid Corp. said yesterday it narrowed its fiscal first-quarter loss by closing stores and trimming costs, and making progress as it works to eliminate $6 billion in debt.
The loss of $98.4 million, or 11 cents per share, came in under Wall Street estimates of 13 cents per share. A year ago, Rite Aid posted a loss of $156.6 million, or 20 cents per share. While the company now expects a slightly larger loss in fiscal 2010, Rite Aid was able to refinance loans that were due to expire, improving its financial position.
The Camp Hill, Pa., said store closings drove down its revenue 1 percent to $6.53 billion from $6.61 billion. Thomson Reuters says analysts expected $6.55 billion, on average.
The company is planning to save money by closing about 117 stores by the end of its fiscal year, targeting locations where sales are poor, or where other Rite Aids are nearby. Rite Aid also said it is seeking rent concessions from landlords of hundreds of unprofitable stores. It has shifted some salaried jobs to hourly wages and is shipping products to poorly performing stores only every other week.
Rite Aid said same-store sales grew 0.6 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, and prescriptions filled grew 2.2 percent.
Rite Aid - the nation's third-largest pharmacy chain by locations - 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 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. The company reduced its debt by about $320 million, leaving it with $5.69 billion of debt.
Raymond James analyst John Ransom said the results show ``meaningful signs of improvement,'' including decreased expenses and stable nonpharmacy results. He kept an ``Outperform'' rating on Rite Aid shares, although he said the company's turnaround will likely take a long time.
