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Rite Aid (RAD) Q1 Loss Narrower Than Expected, Revenues Beat

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Rite Aid Corporation RAD posted first-quarter fiscal 2023 results, wherein the bottom and top lines beat the Zacks Consensus Estimate. However, both metrics declined year over year. Increased non-COVID prescriptions, lower SG&A and continued momentum at Elixir aided the results.

Shares of RAD jumped 20% at the close of the trading session on Jun 23. This might have resulted from the raised fiscal 2023 revenue outlook.

Q1 Highlights

The company delivered an adjusted loss of 60 cents per share against earnings of 38 cents in the prior-year quarter. The figure was narrower than the Zacks Consensus Estimate of a loss of 70 cents.

Revenues declined 2.4% to $6,015 million and surpassed the Zacks Consensus Estimate of $5,728 million. Sluggishness in both Retail Pharmacy and Pharmacy Services segments hurt sales.

In the quarter, the Retail Pharmacy segment's revenues fell 0.1% due to a reduction in COVID-19 vaccines and testings, as well as store closures, somewhat offset by higher non-COVID-19 prescriptions.

Retail Pharmacy same-store sales were up 4.6%, driven by a 6.6% rise in pharmacy sales, which partly offset the 0.5% decrease in front-end same-store sales. Excluding cigarettes and tobacco products, front-end same-store sales remained flat year over year.

Prescription count at same-store sales, adjusted to 30-day equivalent, rose 0.9% on the back of non-COVID-19 prescriptions (up 3.7%), acute prescription (up 11.9%) and maintenance prescriptions (up 1.4%). The acute prescription and maintenance prescription units witnessed growth of 12.3% and 1.1% from the pre-pandemic levels.

In the Pharmacy Services segment, revenues declined 7.8% due to client loss announced earlier and reduced Elixir Insurance memberships.

In the reported quarter, adjusted EBITDA plunged 28% year over year to $100.1 million. The adjusted EBITDA margin contracted 60 bps to 1.7% in the quarter under review. SG&A expenses decreased 2.2% year over year to $1,217.9 million.

Rite Aid Corporation Price, Consensus and EPS Surprise

 

Rite Aid Corporation Price, Consensus and EPS Surprise
Rite Aid Corporation Price, Consensus and EPS Surprise

Rite Aid Corporation price-consensus-eps-surprise-chart | Rite Aid Corporation Quote

Financial Status

Rite Aid ended the reported quarter with cash and cash equivalents of $56.1 million, long-term debt (net of current maturities) of $3,026.5 million, and total shareholders' equity of $8,376 million.

For fiscal 2023, capital expenditure is forecast to be $250 million, which is to be utilized for investments in digital capabilities, technology, prescription file purchases, distribution center automation and store remodels. The company also expects to generate positive free cash flow in fiscal 2023.

FY23 Outlook

Management raised its fiscal 2023 revenue expectations, driven by the increased use of higher-cost drugs at Elixir. Rite Aid’s revenues are anticipated to be $23.6-$24 million, up from the earlier mentioned $23.1-$23.5 billion. The Retail Pharmacy segment’s revenues are likely to be $17.35-$17.65, down from the previously communicated $17.7-$18 billion. Meanwhile, the Pharmacy Services segment’s revenues are expected to be $6.25-$6.35 billion, which compares favorably with the prior mentioned $5.4-$5.5 billion.

The company envisions a loss between 66 cents and $1.19. Adjusted EBITDA is anticipated to be $460-$500 million, with the Retail Pharmacy segment’s adjusted EBITDA at $320-$350 million and the Pharmacy Services segment’s adjusted EBITDA at $140-$150 million.

Business Development

In a recent development, Rite Aid collaborated with Afterpay to enhance the customer experience. With this, RAD became the first national drugstore chain to offer the service of shop online and pay later via Afterpay.

This Zacks Rank #3 (Hold) company revealed plans to expand the Rite Aid Rewards program to improve customer engagement in pharmacy and front-end sales. It also intends to reduce Elixir insurance membership to manage the business's profitability. In the reported quarter, RAD launched 546 newly designed products, and expects to launch more in the second half of this year. It also remains on track with plans to open small-format pharmacies in underserved rural markets such as Indiana, upstate New York and Virginia.

 

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We note that shares of RAD have lost 17.5% in the past three months compared with the industry's decline of 15.2%.

Stocks to Consider

Here are three better-ranked stocks to consider — Dillard’s DDS, Boot Barn Holdings BOOT and Canada Goose GOOS.

Dillard’s operates as a departmental store chain, featuring fashion apparel and home furnishings. It presently sports a Zacks Rank #1 (Strong Buy). DDS has a trailing four-quarter earnings surprise of 224.1%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Dillard’s current financial-year sales suggests growth of 6.1%, while the same for EPS indicates a decline of 33.9% from the year-ago period’s reported numbers. DDS has an expected EPS growth rate of 12.6% for three-five years.

Boot Barn, which provides western and work-related footwear, apparel and accessories, currently has a Zacks Rank #2 (Buy). The company has a trailing four-quarter earnings surprise of 25.2%, on average.

The Zacks Consensus Estimate for Boot Barn’s current financial-year sales and EPS suggests growth of 17% and 4.4%, respectively, from the year-ago period’s reported figures. BOOT has an expected EPS growth rate of 20% for three-five years.

Canada Goose is the designer, manufacturer, distributor and retailer of premium outerwear for men, women and children. It currently carries a Zacks Rank #2. GOOS has a trailing four-quarter earnings surprise of 65.9%, on average.

The Zacks Consensus Estimate for Canada Goose’s current financial year’s EPS suggests growth of 64.4% from the year-ago period’s reported figures. GOOS has an expected EPS growth rate of 27.4% for three-five years.


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