Rite Aid Reports Net Losses despite Annual Revenue Growth
Drugstore chain Rite Aid Corporation reported increased revenue in fiscal 2008. Despite this growth, the retailer still reported net losses for the fourth quarter and fiscal year. Selected financial highlights follow.
Revenues Go Up for the Year, Down for the Quarter
Rite Aid reported a revenue increase of 8.1% during fiscal 2008, as revenues rose from $24.3 billion to $26.3 billion. The retailer primarily attributed this growth to having an extra quarter of sales from the approximately 1,800 Brooks Eckerd stores it purchased in June 2007. However, during Q4 2008, Rite Aid’s revenues dipped 1.7%, from $6.8 billion to $6.7 billion. Rite Aid attributed the quarterly revenue decline to the net loss of 158 stores during the fiscal year.
Non-cash Charges Impact Net Losses
Rite Aid reported net losses for the fourth quarter and fiscal year, which were significantly larger when non-cash charges of goodwill impairment, store impairment and an additional tax valuation allowance against deferred tax assets were factored. With these charges, net losses were $2.3 billion during Q4 and $2.9 billion during the fiscal year. Excluding non-cash charges, net losses were $116.9 million for the quarter and $640 million for the year. Rite Aid reported net losses of $952.2 million in Q4 2007 and $1.1 billion in fiscal 2007.
Same-store Sales Also Rise Annually, Fall Quarterly
Rite Aid’s same-store sales went up 0.8% for the year and declined 1.9% for Q4.
Fiscal 2010 Outlook includes Flat Revenues
Rite Aid said that in fiscal 2010 it expects revenues to be between $26.3 billion and $26.7 billion, or flat to .01% higher, with same store sales improving 0.5-2.5%. Net loss for fiscal 2010 is expected to be between $210 million and $435 million. Capital expenditures are expected to be approximately $250 million.
Proposed Reverse Stock Split Delayed
Rite Aid has delayed effecting a proposed reverse stock split following the New York Stock Exchange’s (NYSE) suspension of its minimum share price listing rule until June 30, 2009. The suspension provides the company with additional time and flexibility to regain compliance with the rule. Stockholders have approved a 1-for-10, 1-for-15 or 1-for-20 reverse stock split exchange ratio.
Distribution Center Closings
Rite Aid will close a distribution center in Newnan, GA, in late September 2009. The 297 employees at the facility will receive severance and outplacement services. Rite Aid acquired the Newnan facility in June 2007 with its purchase of approximately 1,800 Brooks Eckerd stores and six distribution centers. The company said at the time of the acquisition that once all of the Brooks Eckerd stores were integrated into Rite Aid, it would look for opportunities to consolidate the distribution activities of its 14 distribution centers. The 194 stores served by the Newnan distribution center will be served by other Rite Aid distribution centers.
In January, Rite Aid announced that a distribution center in Bohemia, NY serving 125 stores would close in May 2009. Rite Aid also acquired the Bohemia facility in its Brooks Eckerd purchase.
Walgreens Earnings Decline
Rival drugstore retailer Walgreen Co. saw net earnings decline 6.7% during the second quarter of its fiscal 2009, which ended in February 2009, despite record sales of $16.7 billion. Walgreens cited the expense of its Rewiring for Growth cost reduction/productivity improvement plan for about one-third of the earnings loss. Rite Aid Corporation sold seven Rite Aid locations in downtown San Francisco and five Rite Aid locations in eastern Idaho to Walgreens last month.
For the year, Rite Aid opened 33 new stores, relocated 56 stores, remodeled 70 stores, acquired nine stores, and sold or closed 200 stores. Stores in operation at the end of the year totaled 4,901.