For the first quarter, the company reported net loss from continuing operations of $99.3 million, or $1.88 per share, Adjusted net loss from continuing operations of $7.5 million, or $0.14 per share, and Adjusted EBITDA from continuing operations of $110.3 million, or 2.1 percent of revenues.
“While first quarter results did not meet our expectations due to prescription reimbursement rate pressure in the Retail Pharmacy Segment and margin compression in the Pharmacy Services Segment, we are pleased with the improvements in our top-line growth and operating efficiency in the Retail Pharmacy Segment and Medicare Part D revenue growth in the Pharmacy Services Segment,” said Rite Aid CEO John Standley. “Looking forward, enhancements made to the McKesson supply agreement, generic purchasing improvements, revenue growth and the benefits of actions we have taken to reduce costs should drive improved results in both segments for the remainder of the year. We expect to meet our full-year guidance. In addition, through our ‘Path to the Future’ transformation initiative, we are identifying significant opportunities to drive further growth and operating efficiency in fiscal 2021, with a focus on reducing our reliance on traditional pharmacy reimbursement rate models.”
Revenues from continuing operations for the quarter were $5.37 billion compared to revenues from continuing operations of $5.39 billion in the prior year’s quarter. Retail Pharmacy Segment revenues were $3.86 billion and decreased 0.8 percent compared to the prior year period due to a reduction in store count, partially offset by an increase in same store sales. Revenues in the Pharmacy Services Segment were $1.57 billion, an increase of 1.5 percent compared to the prior year period, which was due to an increase in Medicare Part D revenue.
Same store sales from Retail Pharmacy continuing operations for the first quarter increased 1.4 percent over the prior year, consisting of a 2.3 percent increase in pharmacy sales and a 0.3 percent decrease in front-end sales. Front-end same store sales, excluding cigarettes and tobacco products, increased 0.3 percent. Pharmacy sales were negatively impacted by approximately 207 basis points as a result of new generic introductions. The number of prescriptions filled in same stores, adjusted to 30-day equivalents, increased 3.7 percent over the prior year period resulting primarily from the company’s initiatives to drive medication adherence and script growth. Prescription sales from continuing operations accounted for 66.9 percent of total drugstore sales.
Net loss from continuing operations was $99.3 million or $1.88 per share compared to last year’s first quarter net loss from continuing operations of $41.7 million or $0.79 per share. The increase in net loss was due primarily to higher restructuring-related costs, a decrease in Adjusted EBITDA, and higher income tax expense, partially offset by a reduction in depreciation and amortization expense and lease termination and impairment charges.
Adjusted EBITDA from continuing operations was $110.3 million or 2.1 percent of revenues for the first quarter compared to Adjusted EBITDA from continuing operations of $138.0 million or 2.6 percent of revenues for the same period last year, a decrease of $27.7 million. The Retail Pharmacy Segment Adjusted EBITDA from continuing operations decreased $20.1 million compared to the prior year due primarily to weaker pharmacy gross profit caused by prescription reimbursement rate pressure that the company was not able to fully offset with both generic drug purchasing efficiencies and increases in prescriptions filled in comparable stores. The reduction in reimbursement rates was partially caused by a $12.5 million charge for a change in estimated exposure for a retroactive billing from a state Medicaid agency. These negative variances were partially offset by an improvement in Adjusted EBITDA selling, general and administrative (“SG&A”) expense of $23.7 million. This improvement was driven by lower salaries and benefit expense relating to the recent corporate restructuring that more than offset the reduction in Transition Services Agreement (“TSA”) fee income from Walgreens Boots Alliance (“WBA”) and strong labor and expense control at the stores. The Pharmacy Services Segment Adjusted EBITDA decreased $7.5 million over the prior year due to margin compression in the company’s commercial business and other operating investments to support current year and future growth.
In the first quarter, the company remodeled 27 stores, bringing the total number of wellness stores chainwide to 1,787. Additionally, the company opened 1 store and closed 4 stores, resulting in a total store count of 2,466 at the end of the first quarter.
Outlook for Fiscal 2020
Rite Aid is confirming its fiscal 2020 outlook. The company’s outlook assumes a continued decline in prescription reimbursement rates, partially offset by continued prescription count growth, improvements in drug costs and continued strong SG&A expense control. The company expects the quarterly run rate of Adjusted EBITDA for fiscal 2020 to improve given expectations for same store prescription growth, the timing of drug purchasing improvements and actions we are taking to reduce costs.
Rite Aid said it expects sales to be between $21.5 billion and $21.9 billion in fiscal 2020 with same store sales expected to range from an increase of 0.0 percent to an increase of 1.0 percent over fiscal 2019.
Net loss is expected to be between $170.0 million and $220.0 million.
Adjusted EBITDA is expected to be between $500.0 million and $560.0 million.
Adjusted net (loss) income per share is expected to be between a loss of $0.14 and income of $0.72.
Capital expenditures are expected to be approximately $250 million.
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