Rite Aid (RAD) Q4 Loss Wider Than Expected, Revenues Beat

Rite Aid Corporation RAD has posted fourth-quarter fiscal 2022 results, wherein the bottom line lagged the Zacks Consensus Estimate, while sales beat the same. Results gained from contributions from the Bartell buyout and strength in the Retail Pharmacy unit. Management issued a robust fiscal 2021 view, which led the RAD stock to jump nearly 15% on Apr 14.

The company delivered an adjusted loss of $1.63 per share compared with a loss of 78 cents in the prior-year quarter. The figure was also wider than the Zacks Consensus Estimate of a loss of 57 cents.

Revenues grew 2.5% to $6,065.4 million and surpassed the Zacks Consensus Estimate of $5,946 million. The uptick was mainly due to the solid performance in the Retail Pharmacy, which more than offset the sluggishness in the Pharmacy Services segment.

In the quarter, the Retail Pharmacy segment's revenues grew 7.8%, driven by same-store sales growth. Retail Pharmacy same-store sales were up 8.3%, driven by a 10.7% rise in pharmacy sales and a 2.7% increase in front-end same-store sales. Excluding cigarettes and tobacco products, front-end same-store sales increased 3.2%.

Prescription count at same-store sales, adjusted to 30-day equivalent, rose 8.7% on the back of COVID-19 vaccinations, higher acute prescriptions (up 9%) and maintenance prescriptions (up 1%).

In the Pharmacy Services segment, revenues fell 9.4% due to client loss announced earlier and reduced Elixir Insurance membership.

In the reported quarter, adjusted EBITDA skyrocketed 157.1% year over year to $106.1 million. The adjusted EBITDA margin expanded 100 bps to 1.7% in the quarter under review. SG&A expenses increased 4.7% year over year to $1,243.8 million.

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 $39.7 million, long-term debt (net of current maturities) of $2,733 million, and total shareholders' equity of $99 million.

For fiscal 2023, capital expenditure is forecast at $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.

Fiscal 2022 Outlook

Management issued a fiscal 2023 view, which seems encouraging. Rite Aid’s revenues are anticipated to be $23.1-$23.5 billion, with the Retail Pharmacy segment’s revenues at $17.7-$18 billion and the Pharmacy Services segment’s revenues at $5.4-$5.5 billion. The company envisions a loss of 53 cents to $1.06. Adjusted EBITDA is likely 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.

The guidance includes reduced COVID-19 vaccinations and a decline in Elixir revenues, which is likely to be offset by gains from initiatives to increase retail sales and non-COVID-related prescriptions. It also takes into account improvements in the front-end margin, driven by changes in its loyalty program, increased brand penetration and potential expansion in the gross margin at Elixir.

The company also revealed plans to lower costs via the closures of 145 unprofitable stores, reduced corporate administrative expenses and enhanced efficiencies in worked payroll, and other store labor costs. It also intends to reduce costs related to Elixir due to declining membership. These cost initiatives are expected to generate $170 million in savings in fiscal 2023.

Image Source: Zacks Investment Research

We note that shares of this Zacks Rank #3 (Hold) company have plunged 49% year to date compared with the industry's decline of 2.5%.

Stocks to Consider

Here are three better-ranked stocks to consider — Nordstrom JWN, Tapestry TPR and Boot Barn Holdings BOOT.

Nordstrom, a leading fashion specialty retailer in the United States, presently sports a Zacks Rank #1 (Strong Buy). The company has a trailing four-quarter earnings surprise of 13.9%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Nordstrom’s current financial-year sales and EPS suggests growth of 5.7% and 180%, respectively, from the year-ago period’s reported numbers. JWN has an expected EPS growth rate of 6% for three-five years.

Tapestry, the designer and marketer of fine accessories and gifts for women and men in the United States and internationally, presently has a Zacks Rank #2 (Buy). The company has a trailing four-quarter earnings surprise of 28.2%, on average.

The Zacks Consensus Estimate for Tapestry’s current financial-year sales and EPS suggests growth of 17.5% and 22.9%, respectively, from the year-ago period’s reported numbers. TPR has an expected EPS growth rate of 12.5% for three-five years.

Boot Barn, which provides western and work-related footwear, apparel, and accessories, currently carries a Zacks Rank #2. The company has a trailing four-quarter earnings surprise of 47.1%, on average.

The Zacks Consensus Estimate for Boot Barn’s current financial-year sales and EPS suggests growth of 62.6% and 220.8%, respectively, from the year-ago period’s reported figures. BOOT has an expected EPS growth rate of 20% for three-five years.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.