Rite Aid reported a quarterly loss of more than $306 million as the drugstore chain grapples with the loss of customers from its Elixir pharmacy benefit business as executives work to turn around the struggling drugstore chain.
Rite Aid, which has closed more than 140 unprofitable stores in the last two years, reported a fiscal first quarter loss of $306.7 million, or $5.56 per share, for the period ended June 3, 2023. That compares with a loss of $110.2 million, or $2.03 per share in last year’s first quarter.
“The increase in net loss is primarily due to a non-cash charge to write down Elixir goodwill, driven by performance in Elixir Insurance’s Individual Part D Plan and the Company’s decision to exit the Individual Part D market beginning in January 2024,” the company reported Thursday, referring to its Elixir pharmacy benefit management company. “Other factors contributing to the higher net loss were higher restructuring-related charges, a lower gain on sale of assets, higher interest expense and a decrease in Adjusted EBITDA.”
Rite Aid, which has struggled in recent years to compete with larger rivals Walgreens, CVS Health and Walmart pharmacies, said revenues in the quarter fell to $5.65 billion compared to $6.01 billion in the year-ago period “largely due to the reduction in the company’s prescription drug plan (PDP) membership and the loss of commercial clients at Elixir.”
Rite Aid, which has more than 2,300 drugstores across 17 states, said fiscal 2024 losses would be worse than a forecast unveiled earlier this year with a net loss “expected to be between approximately $650 million and $680 million.” In April, Rite Aid said fiscal 2024 losses would be “between $439 million and $466 million.”
“Based on recent business trends, the Company is reducing total company Adjusted EBITDA guidance by $10 million to be between $330 million and $360 million,” the company said of its fiscal 2024 outlook. “Pharmacy Services Segment Adjusted EBITDA expectations are being lowered by $10 million to be between $90 million and $100 million due to higher drug costs and a higher medical loss ratio at Elixir Insurance. Retail Pharmacy Segment Adjusted EBITDA remains unchanged and is expected to be between $240 million and $260 million, which is a result of tougher front-end sales trends balanced with cost savings.”
Still, Rite Aid interim chief executive Elizabeth “Busy” Burr, who replaced Heyward Donigan in January said she sees “early progress.”
“Our first quarter results were driven by strong script growth, solid pharmacy margins and early progress with our turnaround program, which offset underperformance on front-end sales in the retail pharmacy segment and a higher-than-expected medical loss ratio at Elixir Insurance,” Burr said in a statement accompanying the earnings report. “To help mitigate this, we are making targeted reductions to SG&A and capital expenditures over the remainder of the year. Importantly, we made good progress on turnaround initiatives across key areas of the business, and we continue to believe we are on track to achieve Adjusted EBITDA growth in fiscal years 2025 and 2026.”
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