What happened
Shares of Rite Aid (NYSE: RAD) were plunging 29% lower as of 10:58 a.m. ET on Thursday. The steep decline came after the pharmacy retailer announced its fiscal 2023 second-quarter results.
Rite Aid reported Q2 revenue of $5.9 billion, down from $6.1 billion in the prior-year period. The consensus Wall Street estimate was for revenue of $5.77 billion.
The company posted a net loss of $6.07 per share based on generally accepted accounting principles (GAAP). Rite Aid's non-GAAP (adjusted) net loss per share was $0.63. This result was worse than the average analysts' estimate of an adjusted net loss of $0.55 per share.
Although Rite Aid maintained its guidance for full-year revenue, it lowered the earnings outlook for fiscal 2023. The company now expects a GAAP net loss between $520.3 million and $477.3 million, significantly worse than the previous forecast of a GAAP net loss between $246.3 million and $203.3 million. Rite Aid projects an adjusted net loss per share between $1.52 and $0.97 compared to its earlier outlook of an adjusted net loss per share between $1.19 and $0.66.
The pharmacy retailer also cut its guidance for full-year adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA). Rite Aid anticipates adjusted EBITDA between $450 million and $490 million, down from its previous projected range of $460 million to $500 million.
So what
Rite Aid's worse-than-expected Q2 loss stemmed primarily from a goodwill impairment related to its pharmacy services segment. The company's bottom line was also negatively impacted by charges related to previously announced store closures. Both factors were also the key culprits behind Rite Aid's lower full-year earnings guidance.
If there's a silver lining in the company's Q2 update, it's that these should be temporary issues. Also, Rite Aid still expects to generate positive free cash flow in fiscal 2023.
Now what
Inflation could continue to weigh on Rite Aid as consumers curtail spending. On a positive note, Rite Aid could enjoy higher traffic with customers receiving flu and COVID-19 booster shots. However, the stock is likely to remain highly volatile considering the challenges the company faces.
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Keith Speights has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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