Rite Aid posts smaller-than-expected 1Q loss

Associated Press
In this June 20, 2011 photo, a Rite Aid logo is displayed at a store, in Philadelphia. Drugstore chain Rite Aid Corp. is reporting a smaller fiscal first-quarter loss Thursday, June 23, as its sales held steady.(AP Photo/Matt Rourke)
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NEW YORK (AP) — Drugstore chain Rite Aid Corp. said Thursday that its new customer rewards program helped stabilize its flagging sales, leading to a smaller loss.

There are now almost 40 million members in its Wellness Plus customer rewards program, which helped Rite Aid fill more prescriptions at its stores. It said Wellness Plus members shop at Rite Aid more often than nonmembers, and they accounted for 62 percent of its prescriptions and 67 percent of sales of other items, like cosmetics and food.

The Camp Hill, Pa., lost $65.5 million, or 7 cents per share, in the three months ended May 28. A year ago it lost $76 million, or 9 cents per share. The company's selling, general and administrative costs decreased, and sales at stores open at least a year improved.

Analysts expected a wider loss of 12 cents per share, according to FactSet.

Shares of Rite Aid gained 7 cents, or 6.4 percent, to $1.17 while the broader markets declined.

Revenue was unchanged at $6.39 billion, the second straight quarter the company's revenue held steady. Before that, Rite Aid's revenue fell for 10 consecutive quarters. Rite Aid reported its quarterly sales earlier this month, and said revenue from stores open at least one year grew 0.8 percent for the quarter. Sales from stores open at least a year are considered a key measurement of retailer health because they exclude results from stores that have opened or closed in the last year.

Over the winter, Rite Aid broke a long decline in sales at stores open at least a year.

The company's new store formats also helped results. Rite Aid said its new value stores, which include fewer items and feature lower prices, are performing well. It is in discussions with Supervalu Inc. about adding more stores with grocery sections, although those stores have not been as profitable.

Rite Aid is also changing some stores to a new wellness format. Those stores have more organic food, natural personal care products, and homeopathic medicines, along with employees who help customers find vitamins and nutritional supplements, and carry tablet computers to look up products for shoppers. The stores also have wider aisles, brighter lighting, and lower shelves.

Rite Aid, the nation's third-largest pharmacy chain, closed 10 stores during the quarter and operated 4,704 locations as of May 28. It has closed 63 stores over the last year and expects to close a total of 60 stores in fiscal 2012. Rite Aid has closed hundreds of stores in recent years, and sales at its remaining stores are now improving.

Rite Aid is also retiring and refinancing debt to improve its financial position.

The company backed its fiscal-year forecasts, saying it expects to lose $370 million to $560 million, or 42 to 64 cents per share, on $25.7 billion to $26.1 billion in revenue.

Rite Aid still expects sales at stores open at least a year to grow 0.5 percent to 2 percent.

Analysts expect a loss of 54 cents per share and $25.56 billion in revenue, on average.

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