Rite Aid posts fiscal 2008 results
CAMP HILL, Pa. Rite Aid Thursday morning reported a net loss of $1.1 billion for its fiscal 2008 ending March 1, which includes three quarters of results from its acquired Brooks/Eckerd operations—the deal was closed at the top of Rite Aid’s second quarter last year.
Over fiscal 2009, which ends Feb. 28, 2009, Rite Aid said it expects sales to be between $26.7 billion and $27.2 billion with same-store sales (which at that time will include nine months of sales from the Brooks-Eckerd stores) improving 2 percent to 4 percent over fiscal 2008. Adjusted EBITDA is expected to fall between $1 billion and $1.1 billion. Net loss for fiscal 2009 is expected to be between $260 million and $375 million or a loss per diluted share of $.34 to $.48. Capital expenditures, excluding proceeds from sale and leaseback transactions, are expected to be approximately $600 million. Proceeds from sale and leaseback transaction are expected to be approximately $150 million.
“This was a defining year for Rite Aid because we completed an acquisition that gives us significantly increased scale and greater strength in our key existing markets to better compete in the very competitive drug store sector,” stated Mary Sammons, chairman, president and chief executive officer of Rite Aid. “And although we faced a challenging economic environment in the latter part of the year, we continued to build Rite Aid’s core business by increasing same-store sales, filling more prescriptions, growing gross margin rate and controlling expenses. Without the impact of the tax valuation allowance, which also eliminated a tax benefit we expected for the fourth quarter, our net loss would have been $0.06 per diluted share for the fourth quarter and $0.29 per diluted share for the year.”
“We also improved customer satisfaction, opened 120 stores as part of our new and relocated store program and added to the depth of our management team. Although our results were not as strong as we had planned at the start of fiscal 2008, we made good progress nine months into our 16-month Brooks Eckerd integration plan and continued to set the stage for Rite Aid’s future long-term growth.”
As many as 75 percent of the Brooks/Eckerd stores have switched over to Rite Aid’s NexGen pharmacy system, or some 1,300 stores, and is expected to be completed by May, Sammons told analysts during a Thursday morning conference call. To date, 450 Brooks/Eckerd-to-Rite-Aid remodels have been completed—all stores are expected to be converted by October.
In addition, Rite Aid plans to add between 350 and 400 GNC stores-within-a-store to its base this year, which would bring the total number of stores with a GNC-branded supplement department to more than 1,850. Comparable sales in the GNC departments are some three times greater than a typical supplement department, Sammons said.
Brooks/Eckerd stores have benefited significantly from the new Rite Aid product mix, Sammons said, with private lable penetration improving some 200 basis points since June.
Rite Aid recorded $24.3 billion in overall revenues for the year, an increase of 39.8 percent. Same-store sales for the 52-week year increased 1.3 percent (not including Brooks/Eckerd operations), consisting of a 1.7 percent pharmacy same-store sales increase and a 0.7 percent increase in front-end same-store sales. The number of prescriptions filled in same stores increased 0.5 percent. Prescription sales accounted for 66.7 percent of total sales, and third party prescription sales were 95.9 percent of pharmacy sales.
While Rite Aid, along with many retailers, experienced a soft December in its soft quarter, sales picked up significantly across January and February, Sammons told analysts. Revenues for the 13-week fourth quarter were $6.8 billion up 50.5 percent. Same-store sales for the 13-week fourth quarter across the Rite Aid core stores increased 1.3 percent over the prior year 13-week period, consisting of a 1.4 percent pharmacy same-store sales increase and a 1 percent increase in front-end same-store sales.
Net loss for the fourth quarter was $952.2 million or $1.20 per diluted share compared to last year’s fourth quarter net income of $15.1 million or $.01 per diluted share. Included in this quarter’s loss is a previously announced non-cash income tax charge from the recording of a valuation allowance against deferred tax assets that accounted for $894.9 million or $1.12 per diluted share and resulted in the loss of an expected non-cash tax benefit for this year’s fourth quarter. Also contributing to the change were increases in expenses resulting from the Brooks/Eckerd acquisition including an increase in depreciation and amortization expense of $65.5 million, additional interest expense of $57.8 million and integration expense of $37.7 million.
“During the quarter we increased pharmacy sales, filled more prescriptions, improved front-end sales and grew gross margin rates, and we did it as worries about a recession increased and retail sales softened in general,” Sammons stated. “Our team also continued to do a good job of controlling expenses without negatively impacting the shopping experience in our stores. We also made good progress on the Brooks/Eckerd integration with the acquired stores showing improving sales and margin trends.”
In the fourth quarter, the company opened 18 stores, relocated 29 stores, remodeled 14 stores and closed or sold 48 stores which were primarily related to combining acquired stores in close proximity to existing stores and the previously announced exit from the Las Vegas market.
For the year, the company opened 47 new stores, relocated 65 stores, remodeled 145 stores, acquired 1,854 Brooks/Eckerd stores, acquired eight other stores and sold or closed 183 stores. The sold or closed stores included the 25 stores required to be sold for the Brooks/Eckerd acquisition, the combination of 92 stores related to the Brooks/Eckerd acquisition that were in close proximity to one another and 34 stores from exiting Nevada markets. Stores in operation at the end of the year totaled 5,059.
Duane Reade senior vice president D’Arezzo resigns
NEW YORK Duane Reade announced on Wednesday that David D’Arezzo, senior vice president and chief marketing officer, has resigned, effective April 17.
According to Duane Reade, DOArezzo is leaving to assume a senior management position at a large southwest regional company. Additional details were not immediately available.
The Manhattan-based pharmacy retailer is currently searching to fill the chief marketing officer position.
“Dave has been a key contributor to our success over the last two years and the company is well-positioned largely due to his efforts to elevate our product offerings and strengthen the Duane Reade brand proposition,” said newly appointed chairman and chief executive officer John Lederer. “We thank him for his service to Duane Reade, as well as his leadership at an important time in the company’s history, and wish him well in his new role.”
On March 31, Duane Reade announced that Lederer, formerly Loblaw Cos. president, would assume the role of chairman and chief executive officer.
Lederer succeeds Rick Dreiling, who left Duane Reade in late January to steer the ship at discount store chain Dollar General. Since that time, D’Arezzo had served as interim chief executive officer.
In announcing Lederer’ appointment, the company stated that D’Arezzo would continue his responsibilities as senior vice president and chief marketing officer under Lederer.
CCA partners with CDC for emergency responses
Philadelphia PHILADELPHIA — The Convenient Care Association, the non-profit organization representing the retail-based clinic industry, is looking to partner with the Centers for Disease Control and Prevention to explore ways to improve prevention, surveillance and emergency response to diseaseoutbreaks and crises.
“CCA is pleased that these discussions are under way, as this represents an important opportunity to leverage our national network of easily accessible healthcare facilities to improve public health outcomes and reduce costs,” stated Web Golinkin, chief executive officer of clinic operator RediClinic and president of the CCA.
The convenient care industry has recorded 3 million visits and is expected to serve an additional 3.5 million patients by 2009. There are nearly 1,000 clinics in 36 states, and that number is expected to double by the end of 2009.
Added Michael Howe, chief executive officer of CVS Caremark-owned MinuteClinic, “Our ability to see early indicators of infection in easily accessed and diverse locations around the country makes us a strong ally for public health. In addition, in the event of a health crisis, our locations and distribution systems are well-suited for the rapid delivery of countermeasures.”
“I am excited and optimistic about the potential for collaborating with CCA to increase access to preventive services for the nation’s population routinely, as well as in times of crisis,” stated Bradley A. Perkins, chief strategy and innovation officer for CDC.
Research from the New England Complex Systems Institute supports the need for a network that can deliver high-volume, low-complexity, high-impact preventive services. “The characteristics of the retail-based convenience care clinics match this need,” stated Yaneer Bar-Yam, Ph.D., president of the institute. “Their distinct capabilities complement those of traditional providers.”