Rite Aid’s crushing earnings report sends shares tumbling


Data: Yahoo Finance;  Graphic: Axios Visuals
Data: Yahoo Finance; Graphic: Axios Visuals

Shares of Rite Aid fell 28% on Thursday after a dire earnings report questioned the company’s strategy to keep pace with its biggest competitors in pharmacies.

Driving the news: Despite inflation fueling revenue gains for businesses across the economy, Rite Aid reported a 3.5% drop in sales in the second quarter, which it said was partly due to reduced revenue vaccines and COVID tests as well as store closures.

  • On a comparable store basis, retail sales of frontal products decreased by 0.3%.
  • The company also lowered its earnings outlook for its fiscal year.

Our thought bubble: Fending off CVS and Walgreens has proven exceptionally difficult for Rite Aid, which doesn’t have the buying power or pharmacy management resources of its much larger rivals.

  • And with Amazon playing a role for online drugstore customers — not to mention Walmart, Target and dollar stores providing customers with a convenient in-store alternative to drugstore and retail products — Rite Aid is struggling. to stand out.

The other side: Rite Aid CEO Heyward Donigan said on Thursday’s earnings call that the company is offering “significant cost control” in its pharmacy benefits management division and is planning “a large-scale reinvention of our operations frontals called Rite Way”.

  • This effort will yield between $20 million and $40 million in “productivity and workforce improvements” in fiscal year 2024, she said.

But, but, but: The performance “raises questions about the chain’s long-term health,” GlobalData chief executive Neil Saunders wrote Thursday, adding that “it simply doesn’t have the financial firepower or savings to scale to compete with the biggest chains”.

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