Rite Aid 2Q loss doubles on Eckerd struggles

CAMP HILL — Drugstore operator Rite Aid said Thursday its loss nearly tripled in its second quarter because of disappointing results from the Brooks Eckerd stores Rite Aid bought in 2007.

Rite Aid also announced a management shakeup, hiring two former Pathmark Stores Inc. executives, with three top Rite Aid executives leaving the company.

Rite Aid, the third-largest U.S. drugstore chain, said its loss swelled to $222 million, or 27 cents per share, compared with $78.2 million, or 10 cents per share, a year ago. Revenue slipped 1 percent to $6.5 billion from $6.57 billion.

Thomson Reuters said analysts expected a loss of 15 cents per share on $6.51 billion in sales for the quarter ended Aug. 30.

The loss included a $46.2 million decrease in adjusted profit, $35.2 million in store closing and impairment charges, and $36.2 million in refinancing costs. Depreciation and amortization costs increased by $18.4 million.

The company now predicts a larger full-year loss and lower revenue, and says turning around results at Brooks Eckerd pharmacies will take longer than expected.

Rite Aid reduced its expectations because of retail sales trends, the difficulty in improving pharmacy sales at Brooks Eckerd pharmacies, expected economic difficulty, the store closures it made during the quarter and its planned cost cuts.

The company now expects a loss of $445 million to $535 million, or 56 cents to 67 cents per share. Revenue is expected to range between $26 billion and $26.5 billion. Same store sales, or sales at locations open at least one year, are expected to rise 1.5 percent to 3 percent. In April, the company said it expected that improvement to be 2 to 4 percent.

Previously, Rite Aid forecast a loss of 39 cents to 52 cents per share, on revenue of $26.7 billion to $27.2 billion. The company reduced its expectations for the second time this year.

Rite Aid said it will cut costs by improving efficiency, paring about $50 million in spending, and pursuing sale-leaseback transactions to save money on store ownership.

Rite Aid's same-store sales grew 0.6 percent. Both front-end and pharmacy sales grew at Rite Aid stores, but decreased at Brooks Eckerd locations. Brooks Eckerd front end sales were down 2.7 percent and pharmacy sales fell 4.6 percent. Total same-store sales for Brooks Eckerd declined 4.6 percent, compared with a drop of 7.2 percent in the first quarter.

The company closed 57 poorly performing stores and combined 26 others. It finished the quarter with a total of 4,930 locations. It said there was heavy promotional spending in both the pharmacy and front-end businesses and noted the difficult retail environment during the quarter.

Separately, it named John T. Standley as president and chief operating officer and Frank G. Vitrano as chief financial officer and chief administrative officer. Both were previously with grocery chain Pathmark, where Standley was chief executive and Vitrano was president, CFO and treasurer.

Standley replaces COO Robert J. Easley, and Vitrano replaces CFO Kevin Twomey, and Chief Administrative Officer Pierre Legault, all of whom are leaving the company.

In premarket trading, Rite Aid shares fell 2 cents, or 2.1 percent, to 94 cents.

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