Rite Aid Halves 1Q Profit as Costs Grow

Rite Aid (NYSE:RAD) reported a 54% decline in first-quarter profit on Thursday as higher drug costs offset an increase in filled prescriptions.

The Camp Hill, Pa.-based pharmacy chain reported net income of $41.4 million, or 4 cents a share, compared with a year-earlier profit of $89.7 million, or 9 cents.

While four cents a share matches the current median estimate in a Thomson Reuters poll of analysts, the consensus view earlier this month was eight cents. It was reduced in half after Rite Aid issued a profit warning on June 5.

CEO John Standley blamed the quarterly profit decline on higher-than-expected drug costs and reimbursement rates. Earlier this month, the company warned that a delay in the expected reduction in prices of generic medicines would weigh on margins.

Revenue for the three-month period nevertheless rose 2.7% to $6.5 billion from $6.3 billion a year ago last quarter, topping the Street’s view of $6.43 billion, as an overall increase in pharmacy demand helped to offset flat front-store revenue. Same-store, a key growth metric of sales at stores open longer than a year, increased 3.1%.

While it filled 2.3% more prescriptions last quarter at its more established stores, Rite Aid said pharmacy sales were impacted by the introduction of new generic drugs.

The third largest pharmacy behind Walgreen (NYSE:WAG) and CVS (NYSE:CVS) backed its already reduced earnings outlook of 30 cents to 40 cents and said it continues to forecast full-year sales between $26 billion and $26.5 billion.

Analysts on average are calling for in-line earnings of 35 cents on sales of $26.19 billion.

Its shares fell 3.2% to $7.20 in recent trade.