Embattled drugstore chain Rite Aid said losses hit nearly $ 100 million in the company’s fiscal first quarter amid a competitive environment and prescription reimbursement pressures.
To turn the business around, Rite Aid is amid a series of efforts to boost sales, hiring new executives and signing new marketing and business deals such as a partnership with Adobe announced earlier this month. Rite Aid is also searching for a permanent successor to long-time CEO John Standley, who is stepping down following two failed mergers and the pharmacy chain’s deteriorating stock price.
During a conference call Wednesday evening, Rite Aid executives said the board has retained a national search firm and has “identified several qualified candidates,” Standley told analysts on a 45-minute call to discuss the chain’s fiscal first quarter earnings though he didn’t mention who the candidates are. “The search is the board’s highest priority,” he said.
Standley said fiscal first quarter earnings missed the company’s own expectations. Rite Aid reported a net loss from continuing operations of $ 99.3 million, or $ 1.88 per share in the quarter ended June 1. The first quarter loss is more than double the $ 41.7 million loss reported in Rite Aid’s 2018 fiscal first quarter, the company reported.
“While first quarter results did not meet our expectations due to prescription reimbursement rate pressure in the retail pharmacy segment and margin compression in the pharmacy services segment, we are pleased with the improvements in our top-line growth and operating efficiency in the retail pharmacy segment and Medicare Part D revenue growth in the pharmacy services segment,” Standley said.
Sales fell slightly to $ 5.37 billion in the quarter, compared to $ 5.39 billion in the year ago quarter. Rite Aid, though, said retail pharmacy same store sales increased 1.4 percent and “front end same store sales, excluding cigarettes and tobacco products,” grew 0.3 percent.
Rite indicated that more cost-cutting may be in the future for the drugstore chain, which already announced earlier this year a restructuring of management ranks.
“Through our ‘Path to the Future’ transformation initiative, we are identifying significant opportunities to drive further growth and operating efficiency in fiscal 2021, with a focus on reducing our reliance on traditional pharmacy reimbursement rate models,” Standley said.
Rite Aid said the quarter included some positives including the beginning of a successful pilot selling CBD products. Rite Aid, however, didn’t disclose specifics sales from CBD products in limited markets in the northwestern U.S.
In April, Rite Aid announced plans to start selling CBD creams, lotions and lip balms as part of a pilot program in Oregon and Washington where it has about 200 stores. CBD, or cannabidiol, is a compound found in cannabis.
Pharmacy reimbursement pressures and competitive threats like online retailer Amazon’s push into pharmacy are forcing retailers to look at new ways to reinvent their brick-and-mortar drugstores, selling new products and adding more healthcare services.
Rite Aid is no different as the company converts more of its stores to a “wellness” format and looks at new ways to draw customers. In the first quarter, Rite Aid said it “remodeled 27 stores, bringing the total number of wellness stores chain wide to 1,787.”
“Additionally, the company opened 1 store and closed 4 stores, resulting in a total store count of 2,466 at the end of the first quarter,” Rite Aid said in its first quarter earnings report.
Following the sale of stores to Walgreens Boots Alliance in the last two years, Rite Aid’s store count has been cut almost in half. Rite Aid has stores in 19 states, but most are concentrated in 7 states including California on the West Coast and Pennsylvania on the East Coast.
Walgreens initially purchased 1,932 Rite Aid stores and planned to close up to 600 but that number is growing to 750, Walgreens said in April.