Rite Aid Corporation (NYSE:RAD) Caught In A Mess

Rite Aid Corporation (NYSE:RAD) disclosed that profit in its latest quarter declined as the drugstore chain acquired Envision Pharmaceutical Services and booked a loss on retired debt. Meanwhile, it further lowered its earnings outlook for FY2016, reflecting additional expenses and sales trends stemming from the recent acquisition deal.

RAD stock price, up nearly 15% in 2015 through Wednesday’s close, declined sharply to close at $7.67 after results were announced on Thursday. Rite Aid is the U.S.’s third-largest company behind CVS Caremark Corp and Walgreen Co.

The business operations

Rite Aid, like its peers, has adjusted its solutions in an attempt to broaden its business plan as the drugstore and pharmacy industry extends its reach into the health and wellness sector. The company has expanded its RediClinics and remodeled nearly 120 wellness stores, which provide natural personal-care options and organic food and feature consultation space for discussions with pharmacists.

In June 2015, Rite Aid completed its deal with EnvisionRx, which it acquired from TPG for nearly $2 billion. The acquisition deal highlights a major milestone in the move to considerably expand health and wellness solutions.

The management view

Chief Executive John Standley stated that EnvisionRx made constructive contributions during the reported period and boosted sales at drugstores stores. Same-store pharmacy sales jumped 2.8%. The pharmacy division has been facing competition from generic drugs, which affected second-quarter pharmacy sales. Same-store prescription sales were little changed during the quarter.

Darren Karst, the Chief Financial Officer of Rite Aid Corporation (NYSE:RAD) said that comparison of same-store script growth can remain difficult in coming period as the company continues to cycle 2014’s Medicaid expansion. Meanwhile, front-end sales moved 0.3% higher. Overall, the company posted a profit of $21.5 million, down from $129.2 million, a year earlier. It refinanced a part of its debt during the three-month period. The revenue surged 18% to $7.66 billion.

About the Author

John is a special projects and general assignment reporter, noted for breaking several exclusive stories.

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