Rite Aid (RAD) Down on Revised Guidance

Shares of the Rite Aid Corporation (RAD) were trading off -0.94 or -14.16 percent to $5.70 per share in premarket trading this morning, after the company report earnings that beat analyst expectations, but downwardly revised its outlook for the rest of the year. Rite Aid stock closed at $6.64 per share, up +0.23 or +3.59 percent in Wednesday's regular trading session.

Based in East Pennsboro Township, Cumberland County, Pennsylvania, the Rite Aid Corporation began as a single store in Scranton, Pennsylvania in 1962.
The company grew significantly and went public in 1968. Rite Aid is now the largest drugstore chain on the East Coast and the third largest in the country, operating 4,572 locations; the company reported net income of $118.1 million on $25.392 billion in revenue for its fiscal year of 2013. The company ranks at number 100 on the Fortune 500's list of the largest U.S. companies.

Rite Aid reported second quarter net income of $127.8 million or $0.13 per share versus $32.8 million or $0.03 per share in the same period one year ago. The company attributed the jump in net income as a result of an increase in its Adjusted EBITDA to $364.2 million, compared to $341.6 million in the same period last year.

The increase was also in part due to a lower LIFO charge from pharmacy inventory reductions. In addition, the company declared a loss on the retirement of debt from the previous year which was somewhat offset by higher income tax expenses.

Revenues for the quarter came to $6.52 billion versus $6.28 billion in 2013's second quarter, a +3.9 percent increase, while same store sales rose +4.1 percent over the same period last year. Analysts were expecting the company to report a profit of +$0.06 per share on revenues of $6.48 billion.

Rite Aid reported the expansion of one store, the relocation of five stores and the remodeling of 117 stores in the quarter. In addition the company reported opening of only one new store and closing 10 stores, bringing total number of stores to 4,572.

Citing lower profitability from generic drugs that have lost exclusivity and new generic medicines, the company adjusted its guidance for the second half of its fiscal year 2015. Rite Aid is estimating adjusted EBITDA to be between $1.2 billion and $1.275 billion, with net income of between $223.0 million and $330.0 million with income per diluted share of between $0.22 and $0.33. Sales are forecast to be between $26.0 billion and $26.3 billion with same store sales increasing three to four percent over Fiscal 2014. Capital expenditures are anticipated to be about $525 million.

Rite Aid stock is down almost 15 percent in the premarket this morning, indicating investors are concerned over future prospects with the company's guidance being the catalyst for the selloff. Rite Aid stock is trading off of its yearly high of $8.62 made in early June but was still up +72 percent for the year as of yesterday's close.

Other News About Rite Aid
Rite Aid Foundation's KidCents Program Makes Giving Personal
Rite Aid will now allow customers to choose the charity they wish to support.
Company cited an increase in front end pharmacy comps and prescriptions.

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Published on Sep 18, 2014
By Jay Hawk
Jay Hawk
Jay Hawk enjoyed a 12-year professional financial markets career incorporating extensive first hand futures and options experience obtained by trading in the stock, commodity and forex markets on U.S. exchanges. Since retiring as a full-time financial market professional, he has been actively trading stock, commodities, forex and options for his own account and managing funds for others, as well as writing financial market commentary and educational articles.

Copyrighted 2020. Content published with author's permission.

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