Rite Aid Earnings More than Double
Rite Aid, the third-largest U.S. drugstore chain, posted an unexpected quarterly profit Thursday as an income tax benefit and a gain on asset sales offset acquisition costs.
The company also stood by its full-year expectations and its shares rose as much as nearly 6 percent in morning trading.
Rite Aid bought the U.S. Brooks and Eckerd drugstore chains from Canada's Jean Coutu Group on June 4, just after the quarter ended.
The acquisition made Rite Aid the largest drugstore chain on the East Coast, but it still trails Walgreen and CVS/Caremark in revenue and number of stores.
Profit was $27.6 million, or 4 cents per share, in the fiscal first quarter, ended June 2, up from $11.0 million, or 1 cent per share, a year earlier.
Analysts, on average, expected the Camp Hill, Pennsylvania-based retailer to post a loss of 1 cent per share, according to Reuters Estimates.
First-quarter sales rose 2.8 percent to $4.46 billion. As previously reported, sales at stores open at least a year rose 2.3 percent, with pharmacy same-store sales up 2.7 percent and same-store sales of "front-end" general merchandise up 1.6 percent.
Customers bought more items that were on sale during the latest quarter and the photo category continued to be a drag on front-end same-store sales.
Chairman, President and Chief Executive Mary Sammons said that Rite Aid also saw customers buying more products at promotional prices throughout last year.
"They are just buying more economically and I think it's undoubtedly related to their economic condition and the cost of fuel, etcetera," Sammons said during the call.
Photo kiosks such as those at Rite Aid stores have been hit by the rise of consumers using digital cameras and printing photos at home or via Web sites, rather than bringing film to stores to be developed.
Sammons said Rite Aid is working to control photo expenses and is looking at ways to improve the category, including expanding its online offerings.
Rite Aid is on track to open 125 new and relocated stores this year, she said.
Rite Aid still expects to post a net loss for fiscal 2008 of between $47 million and $129 million, or a loss of 11 cents to 23 cents per share, including an estimated expense of $145 million to integrate the acquired stores.
It also still anticipates fiscal 2008 sales of $25.3 billion to $26 billion.