Weak Cold and Flu Seasons Hurt Rite Aid

Drug chain scales back full-year guidance
Gina Acosta
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Rite Aid has been administering COVID-19 shots in its stores for weeks.

A soft cold and flu season is weighing heavily on Rite Aid revenue, as the drug chain said it saw a decline of nearly 37% in its cough, cold and flu-related product categories over the winter.

On March 25, Rite Aid revised its full-year earnings before interest, taxes and depreciation to between $425 million and $435 million, from a prior forecast of between $490 and $520 million.

“During the fourth quarter our industry was impacted by a historically soft cough, cold and flu season, as well as the continued impacts of COVID on the deferral of elective procedures and related acute prescription volume and selling, general and administrative expenses. In addition, there were significant weather events in February that impacted our supply chain and depressed sales,” said Heyward Donigan, president and CEO of Rite Aid. “Looking ahead, we have seen acute prescriptions return to positive levels in March, and we are proud to be selected as one of the retail providers administering COVID vaccines in the majority of our key states and cities, representing over 1,800 of our stores. We are significantly ramping up the number of vaccines we are administering on a daily basis, and have administered approximately 1 million COVID vaccines in March to date. Despite the extraordinary external headwinds that impacted our fourth quarter results, the entire organization is engaged, motivated and relentless in the execution of our RxEvolution strategy.”

Front-end same store sales fell 5.6% for the company's fourth quarter ended Feb. 27. The decline in cold and flu categories had a disproportionately negative impact on front-end gross profit, as these are comprised of higher margin products. Same store prescriptions declined approximately 1%, driven by an over 14% decline in acute prescriptions. The company also incurred incremental COVID-related SG&A expenses due to a one time hero-pay bonus, cleaning costs, pandemic sick leave and other incremental operating costs. Rite Aid estimates the following impacts on fourth quarter adjusted EBITDA: $20 million to $24 million from lower incidence in cough, cold and flu related illnesses; $20 million to $24 million due to difficult weather conditions; and $10 million to $12 million related to continued effects of COVID-19. The total unanticipated impact on the quarter results was approximately $50 million to $60 million.

For fiscal 2021, Rite Aid now expects revenue to be approximately $24 billion with same store sales expected to increase approximately 3.5% over fiscal 2020. Net loss is expected to be between $90 million and $100 million. Adjusted EBITDA is expected to be between $425 million and $435 million. Capital expenditures are expected to be approximately $315 million, which includes $95 million for the acquisition of Bartell Drugs. Liquidity is approximately $1.7 billion.

Rite Aid is scheduled to release financial results for its fiscal 2021 fourth quarter, which ended Feb. 27, on  April 15. 

Operating more than 2,400 retail pharmacy locations across 17 states, Camp Hill, Pennsylvania-based Rite Aid is No. 18  on The PG 100, Progressive Grocer’s list of the top food retailers in North America.

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