Rite Aid: Private Brand Increases Lead Q3 2011

This past week Camp Hill, Pennsylvania based drugstore Rite Aid held its Third Quarter fiscal 2012 conference call. During the call John Standley, President and Chief Executive Officer and Frank Vitrano, Chief Financial and Chief Administrative Officer presented an overview of third quarter results and key financial highlights as well as the fiscal 2012.

Highlights include:

  • Third Quarter Net Loss of $0.06 per Diluted Share Compared to Prior Third Quarter Net Loss of $0.09 per Diluted Share
  • Third Quarter Adjusted EBITDA of $221.5 Million Compared to Prior Third Quarter Adjusted EBITDA of $212.5 Million
  • Fourth Consecutive Quarter of Comparable Store Sales and Adjusted EBITDA Increases

The company reported revenues of $6.3 billion, a net loss of $52.0 million or $0.06 per diluted share and Adjusted EBITDA of $221.5 million or 3.5 percent of revenues. These results benefited primarily from continued growth in same store sales.

“We remain pleased with the continued improvement in our top-line results, highlighted by same store sales and Adjusted EBITDA increases for the fourth consecutive quarter,” said John Standley, Rite Aid President and CEO. “Our pharmacy sales growth was strong this quarter, with key drivers being our well-planned and executed flu immunization program and continued favorable customer response to our wellness+ loyalty program.”

“Other key accomplishments during the quarter include a continued rollout of our new private brand architecture. We now have more than 2,300 items converted and we are on track to have 2,900 items in these brands this fiscal year. For the quarter, our private brand penetration increased to 16.8% from 15.6% last year,” said John Standley.

“With respect to our flu immunization program, through the entire team’s efforts, our more than 11,000 chainwide immunizing pharmacists have already provided more than double the number of flu shots we did last year and are on pace to achieve our goal of administering 1.5 million immunizations for this season. Additionally, we now have more than 47 million enrolled members in our wellness+ program and we will continue to enhance its value to members with even stronger, more compelling offerings in the new year.”

Third Quarter Summary
Revenues for the 13-week quarter were $6.3 billion versus revenues of $6.2 billion in the prior year third quarter. Revenues increased 1.8 percent primarily as a result of an increase in same store sales, which were partially offset by store closings.

Same store sales for the quarter increased 2.0 percent over the prior 13-week period, with flat front end sales and a 2.9 percent increase in the pharmacy. Pharmacy sales included an approximate 163 basis point negative impact from new generic introductions. The number of prescriptions filled in comparable stores increased 0.5 percent over the prior-year period. Prescription sales accounted for 68.7 percent of total drugstore sales, and third party prescription revenue was 96.4 percent of pharmacy sales.

Net loss was $52.0 million or $0.06 per diluted share compared to last year’s third quarter net loss of $79.1 million or $0.09 per diluted share. An increase in gross profit and decreases in depreciation and amortization, lease termination and impairment charges, interest expense and lower deferred revenue related to the company’s customer loyalty program contributed to the decrease in net loss. Partially offsetting these improvements was an increase in operating expenses and LIFO charges.

Adjusted EBITDA (which is reconciled to net loss on the attached table) was $221.5 million or 3.5 percent of revenues for the third quarter compared to $212.5 million or 3.4 percent of revenues for the like period last year.

In the third quarter, the company relocated 2 stores, remodeled 119 Wellness stores and closed 18 stores. Stores in operation at the end of the quarter totaled 4,679.

Rite Aid Updates Sales, Raises Adjusted EBITDA and Lowers Net Loss Guidance for Fiscal 2012. 
Rite Aid has updated its fiscal 2012 guidance with sales expected to be between $25.85 billion and $26.0 billion, same store sales to range from an increase of 1.15 percent to an increase of 1.75 percent over fiscal 2011 and Adjusted EBITDA (which is reconciled to net loss in the attached table) to be between $865 million and $910 million. Net loss is expected to be between $325 million and $440 million or a loss per diluted share of $0.37 to $0.50. Capital expenditures are expected to be $250 million.

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Christopher Durham
Christopher Durham is the president of My Private Brand and the co-founder of The Vertex Awards. He is a strategist, author, consultant and retailer who built brands at Delhaize-owned Food Lion, and lead strategy and brand development for Lowe’s Home Improvement. He has consulted with retailers around the world on their private brand portfolios including: Family Dollar, Petco, Staples, Office Depot, Best Buy, Metro (Canada), TLW (Taiwan) and Hola (Taiwan). Durham has published five definitive books on private brands, including his first book, Fifty2: The My Private Brand Project. In 2017, he will debut his newest book, Vanguard: Vintage Originals, a visual tour of innovation and disruption in private brand going back to the mid-1800’s. Dynamic in his presentation while down to earth and frank in his opinions, he has presented at numerous conferences, including FUSE, The Dieline Conference, Packaging that Sells, Omnishopper and PLMA’a annual trade show in Chicago. Durham lives in Charlotte, NC with his wife, Laraine, and two daughters, Olivia and Sarah.