Rite Aid Stock Down on Poor Earnings Update

Stock in Rite Aid Corporation is tumbling today following a dismal earnings update by the company. On Thursday Rite Aid released sales results for May and updated its quarterly and yearly earnings est...
Rite Aid Stock Down on Poor Earnings Update
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  • Stock in Rite Aid Corporation is tumbling today following a dismal earnings update by the company. On Thursday Rite Aid released sales results for May and updated its quarterly and yearly earnings estimates, previewing a year of worse-than-expected earnings.

    Rite Aid reported that its front-end same store sales for the five weeks ending on May 31 increased just 0.5% over the same month one year ago. Pharmacy same store sales were up 5% and overall same store sales were up 3.5%. Rite Aid drugstore sales were up 2.5% for the month, hitting $2.484 billion.

    For the quarter so far, overall same-store sales increased 3.1% and pharmacy same store sales increased 4.6% over the same 13-week period last year. However, front-end same store sales have not increased, remaining flat for the quarter. Drugstore sales for the quarter so far are up 2.6% to $6.425 billion.

    Despite the rise in sales, Rite Aid’s preliminary quarterly results show that the company expects to report between $35 million and $45 million in net income, earning $0.04 per share. The company also expects its quarterly adjusted EBITDA to fall behind that of the same quarter last year. Rite Aid is blaming this decline on “higher-than-expected drug costs” due to delayed price reductions among generic pharmaceuticals and a “greater-than-expected reduction in reimbursement rates.” The company is scheduled to release its final quarterly results on June 19.

    Based on these quarterly earnings estimates, Rite Aid revised down its total-year financial guidance. The company now estimates yearly adjusted EBITDA to come in between $1.275 billion and $1.35 billion. Rite Aid now expects to take in between $298 million and $408 million in net income for the year with a corresponding income per share of between $0.30 and $0.40.

    The earnings update came as a disappointment to investors who had been expecting Rite Aid to bring in closer to $0.40 per share in income for the year. With $0.40 now closer to the high end of the company’s estimates, Rite Aid could have a hard time satisfying investor expectations in the coming quarters.

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