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Rite Aid stock dives on earnings miss, trimmed outlook

Yahoo Finance Live anchors discuss second-quarter earnings for Rite Aid.

Video Transcript

JULIE HYMAN: All right, let's get to some other movers. Rite Aid shares are sharply lower. That's after the company reported a miss on earnings and slashed its fiscal 2023 outlook for net loss and adjusted EBITDA. The company's CEO noting that Rite Aid expects continued pressure on consumer spending and supply chain challenges as it looks ahead to the second half of the year.

So the decreases that we're talking about here, so adjusted EBITDA for the full year going to be at most $490 million. That's a decrease in the upper end of that forecast of 10 million. So not great there. Adjusted loss per share are going to be worse than estimated. And this is another one where we've seen some struggle here consistently from Rite Aid.

BRAD SMITH: Yeah.

BRIAN SOZZI: Go ahead. Go ahead.

BRAD SMITH: No, I was just going to say that this-- I mean, this business comes down to two segments-- its retail and its pharmacy services. And within the retail side of the business, which really accounts for the bread and butter, the majority of the revenues that come in, it's still this larger question of how they're going to mitigate some of the margin compression that's taking place over this most recent quarter, especially showing up in the figures where even on lower revenues year over year, they're seeing the net losses widen right now.

And that particularly is something that investors are going to be paying close attention to when that will start to turn around, especially within the retail pharmacy segment. We've continued to hear guest after guest talk about both healthcare and within the healthcare segment, the pharmacy side of that and fulfilling a lot of those prescriptions. And I think that's where retail, and Rite Aid specifically, plays such a critical part in that broader economy and broader market and that portfolio play even that some of the guests have laid out.

BRIAN SOZZI: I have, like, 10 retailers in my head from a consumer standpoint that I really don't care about anymore. And this one is Rite Aid. And other ones I have, I'll share the whole list on Twitter, but it's JCPenney and Aeropostale. And I say that because right by my house, I have a Rite Aid next to a Target.

Now, I'm going into Target. When I go into Target, I can do my full shopping. I get my groceries, get my other various items I need. And then I go into the CVS. There's a CVS inside of every single Target. It's one of the first things that CEO Brian Cornell did. And that ability to offer one-stop shopping is why you're seeing just these continued dreadful results from a Rite Aid.

Look at the photos we were showing there. It looks like a completely, just terrible shopping experience. And it, in fact, is. You go into that store, you can't get groceries. You can maybe get a pre-made sandwich, but you can't do your grocery shopping for the week. And that is a huge, huge, huge problem.

BRAD SMITH: What are you getting in CVS that you can't get in Target?

BRIAN SOZZI: Well, you can go-- it's just one stop.

JULIE HYMAN: His medicine.

BRIAN SOZZI: It's one stop. So I can get my prescription, so from CVS. I go pick that up. And then I'm going down to Target at the same time. I'm picking up my steak, my meat, my cereal, whatever it is. Then before I leave the store, I go pick up my prescription, all in one trip.

BRAD SMITH: Well, so that's the next big foray that Target is trying to make now, too, which is going to be interesting to watch because even if you have the annexation of all of these locations that are so kind of annexed to each other or have been historically because it made sense because Target didn't have a pharmacy, Target's now starting to put some of the pharmacies in their locations, which is directly going to hit into the Rite Aid--

JULIE HYMAN: Well, right, that's what he's saying. He said the CVS is inside of the Target.

BRAD SMITH: They're inside a Target.

BRIAN SOZZI: It's amazing. It's a great experience.

BRAD SMITH: Wonderful.

JULIE HYMAN: Exactly.

BRIAN SOZZI: Get my prescription, get my steak. On the way out, I get my Starbucks coffee, get my prescription on the way out. Boom, done, how awesome. No reason to go to Rite Aid next door. No clue how it's even open. Don't even know.

BRAD SMITH: I'm glad we're on the same page about that.