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Rite Aid (RAD) Q3 Earnings Beat Estimates, Revenues Lag

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Rite Aid Corporation RAD posted third-quarter fiscal 2022 results, wherein the bottom line surpassed the Zacks Consensus Estimate, while sales lagged the same. Results gained from robust demand in COVID-19 vaccination and testing.

The company delivered adjusted earnings of 15 cents per share, down 62.5% from 40 cents in the prior-year quarter. However, the figure surpassed the Zacks Consensus Estimate of a loss of 18 cents.

Revenues grew 1.8% to $6,229 million but missed the Zacks Consensus Estimate of $6,281 million. The uptick was mainly due to the solid performance in the Retail Pharmacy, which more than offset the sluggishness in the Pharmacy Services segment.

In the quarter, the Retail Pharmacy segment's revenues grew 7.9%, driven by gains from the acquisition of Bartell and same-store sales growth. Retail Pharmacy same-store sales were up 4.4%, driven by a 5.9% rise in pharmacy sales and a 0.4% increase in front-end same-store sales. Excluding cigarettes and tobacco products, front-end same-store sales increased 1%.

Prescription count at same-store sales, adjusted to 30-day equivalents, rose 7.9% on the back of COVID-19 vaccinations, higher acute prescriptions (up 3.9%) and maintenance prescriptions (up 1.7%).

In the Pharmacy Services segment, revenues fell 10.8% due to client loss announced earlier and reduced Elixir Insurance membership.

Online revenues surged 75% year over year in the quarter under review on the back of continued strength in on-demand delivery, third-party marketplaces, and buy online, pick up at store options. Management expanded Uber Eats and Postmates, and rolled out its buy online, pick up at store facility in the quarter under review.

In the reported quarter, adjusted EBITDA grew 12.7% year over year to $154.8 million. The adjusted EBITDA margin expanded 30 bps to 2.5% in the quarter under review. SG&A expenses increased 10.4% year over year to $1,276.9 million.

Rite Aid Corporation Price, Consensus and EPS Surprise

Rite Aid Corporation Price, Consensus and EPS Surprise
Rite Aid Corporation Price, Consensus and EPS Surprise

Rite Aid Corporation price-consensus-eps-surprise-chart | Rite Aid Corporation Quote

Financial Status

Rite Aid ended the reported quarter with cash and cash equivalents of $155.3 million, long-term debt (net of current maturities) of $3,167.1 million, and total shareholders' equity of $472 million. Capital expenditure is likely to be $275 million in fiscal 2022. Rite Aid also boasts strong liquidity of $1.6 billion.

Fiscal 2022 Outlook

Driven by the rising demand for COVID-19 vaccine and testing as well as positive momentum in the fiscal third quarter, management lifted its adjusted EBITDA view for fiscal 2022. Adjusted EBITDA is likely to be $500-$520 million, up from the earlier mentioned $460-$500 million.

For fiscal 2022, the company expects sales of $24.4-$24.7 million, down from the earlier mentioned $25.1-$25.5 billion. The Pharmacy services segment's sales of $7.1-$7.2 billion, down from the previously mentioned $7.7-$7.8 million. Adjusted net loss is envisioned to be 49-4 cents, which compared unfavorably with the previously mentioned loss of 90-53 cents.

We note that shares of this Zacks Rank #3 (Hold) company have lost 4.9% year to date against the industry's growth of 41%.

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Business Developments

Management has entered a rebate aggregation agreement with Prime Therapeutics to drive value for Elixir's PBM clients. The company also launched a store closure program to lower costs and drive profitability. The first phase of the program has started with 63 store closures, which is likely to benefit EBITDA by $23 million on an annual basis.

Here's How Other Stocks Fared

We have highlighted three better-ranked stocks in the Retail - Wholesale sector, namely Boot Barn Holdings BOOT, Tractor Supply Company TSCO and Capri Holdings CPRI.

Boot Barn Holdings, the lifestyle retailer of western and work-related footwear, apparel and accessories, currently sports a Zacks Rank #1 (Strong Buy). Shares of BOOT have skyrocketed 160% year to date. You can see the complete list of today's Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Boot Barn Holdings' sales and earnings per share (EPS) for the current financial year suggests growth of 54.4% and 183.3%, respectively, from the year-ago period's reported figures. BOOT has a trailing four-quarter earnings surprise of 35.3%, on average.

Capri Holdings, which operates membership warehouses, presently flaunts a Zacks Rank #1. The company has a trailing four-quarter earnings surprise of 1024.9%, on average. Shares of CPRI have rallied 45.2% year to date.

The Zacks Consensus Estimate for Capri Holdings' sales and EPS for the current financial year suggests respective growth of 12.6% and 1.2% from the year-ago period's reported figures. CPRI has an expected EPS growth rate of 56.4% for three-five years.

Tractor Supply, a rural lifestyle retailer in the United States, currently has a Zacks Rank #2 (Buy). The company has a trailing four-quarter earnings surprise of 22.8%, on average. Shares of TSCO have surged 60.3% year to date.

The Zacks Consensus Estimate for Tractor Supply's sales and EPS for the current financial year suggests growth of 19% and 23.9%, respectively, from the year-ago period's reported numbers. TSCO has an expected EPS growth rate of 9.6% for three-five years.


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Rite Aid Corporation (RAD) : Free Stock Analysis Report

Tractor Supply Company (TSCO) : Free Stock Analysis Report

Boot Barn Holdings, Inc. (BOOT) : Free Stock Analysis Report

Capri Holdings Limited (CPRI) : Free Stock Analysis Report

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