Rite Aid Surprises with Net Profit in Q4, First Profitable Year Since 2007

Andrew Klips |

Rite AidContinuing its turnaround story, Rite Aid Corporation (RAD) on Thursday delivered its financial report from the fourth quarter and fiscal 2013 ended March 2, showing the company notched a profit for a full year for the first time in the past six years.

For the fourth quarter, the Camp Hill, Pennsylvania-based drug store operator reported revenue of $6.46 billion, down 7.5 percent from $7.15 billion in the year prior quarter. The latest quarter only had 13 weeks, as opposed to 14 weeks in last year’s. Less expensive generic prescriptions also impacted sales totals. Net income for the quarter was $123.1 million, or 13 cents per share, versus a net loss of $161.3 million, or 18 cents per share, in the year earlier quarter.

Wall Street was expecting zero profits (with some analysts calling for a small net loss) on revenue of $6.45 billion.

It was the second straight quarter for Rite Aid recording a profit after a string of three consecutive quarters with a net loss. The company has managed to swing to profitability on declining revenue, with the fourth quarter marking its third consecutive decrease in year-over-year sales.

"Thanks to the hard work of our entire Rite Aid team, we generated outstanding results in the fourth quarter, which helped us to deliver one of the best full-year performances in company history," said John Standley, chairman, president and chief executive at Rite Aid.

Same-store-sales decreased 2.0 percent for the fourth quarter, on the back of a 3.1 percent decline in pharmacy sales. Volumes of drug sales increased, however those gains were offset by a 659 basis point negative impact of new generic drugs being introduced. Generics are a doubled-edged sword for pharmacies as they negatively affect sales totals, but provide a positive impact on gross profits.

For the whole fiscal year 2013, Rite Aid tallied $25.4 billion in sales, compared to $26.1 billion a year earlier. Rite Aid cited one less week of sales and the impact of generics for the lower figure. Net income for the full year was $118.1 million, or 12 cents per share, compared to a net loss of $368.6 million, or 43 cents per share, in fiscal 2012.

The full-year revenue was in line with analyst predictions.

As far as fiscal 2014, Rite Aid expects sales to be between $24.9 billion and $25.3 billion. Same-store-sales are seen to range from a decrease of 0.75 percent to an increase of 0.75 percent over fiscal 2013. Net income is expected between $45 million and $200 million or income per share of 4 cents to 20 cents.

Shares of RAD have been volatile over the past year, falling from $2.12 highs last March all the way down to 95 cents in December, only to climb back up to $1.95 again last month. Shares closed up 0.6 percent on Wednesday at $1.79, but are looking to come out strong at the opening bell with pre-market activity sending the stock upward to test 52-week highs on the strength of the earnings beat.

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Companies

Symbol Name Price Change % Volume
RAD Rite Aid Corporation 8.09 0.11 1.38 10,355,634
SNC State National Companies Inc. 13.40 0.11 0.83 25,017

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