Cumberland County-based drugstore chain Rite Aid Corp. reported a 55 percent drop today in first-quarter net income.
Rite Aid alerted investors June 5, when it revised expectations for its first-quarter earnings. Since then, Rite Aid stock has tumbled from $8.50 per share to $7.44 at this morning's opening bell.
The company reported net income of about $41.4 million, or 4 cents per diluted share, compared with about $89.7 million, or 9 cents per diluted share, in the year-ago period.
Rite Aid said the decline resulted primarily from a decrease in adjusted EBITDA and higher income tax expense, partially offset by lower interest expense and a lower LIFO charge.
The company reported revenues of $6.5 billion and adjusted EBITDA of $282.6 million, or 4.4 percent of revenues. Year-over-year revenues for the quarter increased 2.7 percent, primarily as a result of an increase in pharmacy same-store sales, Rite Aid said in a news release.
"In the first quarter, we delivered a strong store operating performance, highlighted by increases in same-store sales and same-store prescription count," said Chairman and CEO John Standley. "As we work through managing the higher-than-expected drug costs and reimbursement rate pressure that affected our financial results for the quarter, we remain focused on executing our strategy to expand our health care offering and transform Rite Aid into a growing retail health care company."
Same-store sales for the quarter increased 3.1 percent over the prior year. Front-end same-store sales were flat compared to the prior-year period, while pharmacy same-store sales increased 4.6 percent. Pharmacy sales included an approximate 143 basis point negative impact from new generic introductions. A basis point is equal to 0.01 percent and is used by Rite Aid to describe revenue lost due to generic drugs.
The number of prescriptions filled in same stores increased 2.3 percent over the prior-year period. Prescription sales accounted for 68.4 percent of total drugstore sales, and third-party prescription revenue was 97.4 percent of pharmacy sales.
Adjusted EBITDA was $282.6 million, or 4.4 percent of revenues for the first quarter -- compared to $344.8 million, or 5.5 percent of revenues for the like period last year. The decrease in adjusted EBITDA was driven by a reduction in pharmacy gross profit due to lower reimbursement rates that were not offset with reductions in generic costs, as well as higher salary- and payroll-related expenses, the release said.
In the first quarter, the company relocated three stores, remodeled 105 stores and expanded one store, bringing the total number of wellness stores chainwide to 1,325. The company also acquired one store and closed seven stores, resulting in a total store count of 4,581 at the end of the first quarter.