Apr 01, 2010 —The bad news continued for Rite Aid stockholders Wednesday as the company posted its 11th straight quarterly loss.
The company recorded a 24-cents-per-share loss for the final quarter of 2010—more than Wall Street’s expectations of 20 cents.
The company blamed a mild cold and flu season, bad winter weather, the continued bad economy and pressure from low pharmacy margins for the quarterly results. Market leader CVS gained in its most recent quarter, while Walgreens, while still profitable, posted a small loss.
Rite Aid’s fiscal year-end news was mixed, with the East Pennsboro Twp.-based drugstore chain losing 59 cents a share, or $506.7 million. Still, it was better than the previous year’s loss of 79 cents a share when one-time charges were factored out.
The news sent the stock
sliding from $1.69 to $1.50 a share by the day’s end.
On the positive side, chairwoman and CEO Mary Sammons said the company saw better sales of front-end products, such as food and cosmetics, and controlled operational expenses.
While the company knocked down its debt and refinanced its credit, it still owes more than $6 billion.
According to Marketwatch, John Ransom, an analyst with Raymond James, said the company’s results were “worse than expected, but not surprising considering the stagnant same-store sales in the quarter.”
Ransom also was quoted as saying the company’s liquidity remains strong and the company’s inventory initiatives were paying off.
By contrast, another analyst said it’s up to President and Chief Operating Officer John Standley, who takes over as CEO on June 1, to get numbers moving in the right direction or face the possibility “there could be no more Rite Aid.”
Howard Davidowitz, chairman of Davidowitz & Associates, a national retail consulting and investment banking firm headquartered in New York City, said the company is caught in a tough, downward cycle.
It’s not making its numbers, Davidowitz said, so it can’t get the financial leverage it needs to improve stores or bring in new products.
There is still hope, he said.
If Rite Aid can focus its attention—and by all indications from Standley on Wednesday, it will—on promotions, floor changes and improved customer relations
“24 hours a day,” it is possible the company could move in the right direction, he said.
To that end, Rite Aid’s Wellness Plus customer loyalty program represents one of the largest marketing initiatives in several years, company officials said.
The program, which provides a series of progressive discounts and health care services to frequent shoppers, will be rolled out chainwide this year.
The company also is rebranding and expanding its private labels, which have higher profit margin, to better distinguish their value to customers, expanding its GNC department to 105 stores and adding about 4,000 pharmacists qualified to run immunization clinics.
If things don’t change, bankruptcy could loom. Acquisition isn’t likely, Davidowitz said, because government regulations would restrict a wholesale purchase by a larger chain and Rite Aid’s heavy debt makes private equity firms shy away.
Rite Aid anticipates sales for 2011 to be $25.2 billion to $25.6 billion.
Same-store sales are expected to range from a 1 percent decrease to a 1 percent increase over 2010, company officials said.
Net losses are projected to be $355 million to $570 million, with a loss of 41 to 65 cents a share.
The company ended 2010 with 4,780 stores and anticipates closing another 80 in the coming year. Rite Aid has 97,000 employees across the country.
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