Rite Aid Earnings, Wrong Answer (RAD, WAG, CVS, WMT)

Rite Aid Corp. (NYSE: RAD) is getting clipped this morning after its quarterly earnings report.  As you have grown accustomed to, the ‘earnings report’ is really a loss report.  The report starts out with hope.  It is the guidance and other metrics that hurt.

Rite Aid has never really been able to regain its former glory.  Both Walgreen Co. (NYSE: WAG) and CVS Caremark Corporation (NYSE: CVS) have been formidable competitors, while Wal-Mart Stores Inc. (NYSE: WMT) has been a more than formidable check and balance to the entire drug store sector.

The troubled retail drugstore reported a loss at -$0.09 EPS on more than a 2% revenue decline to $6.2 billion.  Thomson Reuters had estimates of -$0.13 EPS and $6.2 billion in revenues.

Looking ahead, Rite Aid lowered guidance.  It now sees -$0.60 to -$0.74 EPS for 2011 versus a Thomson Reuters figure of -$0.57 EPS and versus a prior target of roughly -$0.46 to -$0.67 EPS.  It also sees 2011 revenues of $25.0 to $25.2 billion versus $25.19 billion from Thomson Reuters and versus a prior target of $25.0 to $25.4 billion.

While total sales were down more than 2% in the last quarter, Rite Aid’s same-store sales came to a drop of 1.3% from a year earlier.  The same-store pharmacy sales were actually down 1.9%, which implies that those getting prescriptions are heading elsewhere or are opting for cheaper drugs via generics.  Prescriptions filled in those same store sales also fell 1.7%.

The company maintained that this was under expectations but it also has blamed a weak cold and flu season.

The only good takeaway here is that the front-end merchandising sold better than its pharmacy operations.  That hardly feels like a turnaround but it will just have to suffice for now.

Rite Aid shares are down 2.4% at $0.89 in the pre-market trading versus a $0.91 close and versus a 52-week trading range of $0.86 to $1.77.  Some turnaround stocks just never manage to turn around.

JON C. OGG