CAMP HILL, Pa. — Rite Aid Corp. reported on Thursday its earnings  for its fourth quarter as well as the fiscal year, which ended February 29, 2020.

Heyward Donigan

For the fourth quarter, the company reported net loss from continuing operations of $343.5 million, or $6.43 per share; adjusted net loss from continuing operations of $19.9 million, or $0.37 per share, and adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) from continuing operations of $135.6 million, or 2.4% of revenues.

“I’d like to thank our Rite Aid team for working together to deliver a solid finish to the fiscal year,” said Heyward Donigan, president and chief executive officer of Rite Aid. “Strong execution by our team drove growth in both pharmacy services segment revenues and retail pharmacy segment prescription count, and helped deliver our second consecutive quarter-over-quarter improvement in adjusted EBITDA. These results provide important momentum as we redefine our industry by deploying our bold, new RxEvolution strategy.”

Fourth quarter revenues from continuing operations were $5.73 billion compared to revenues from continuing operations of $5.38 billion in the prior year’s quarter, the company reported, with the retail pharmacy segment posting revenues of $3.99 billion — an increase of 0.6% compared to the prior year period due to an increase in same store sales. 

Revenues in the pharmacy services segment were $1.8 billion, an increase of 23.1% compared to the prior year period, which was due to an increase in Medicare Part D membership of approximately 244,000 compared to the prior year period.

Same store sales in the retail pharmacy segment from continuing operations for the fourth quarter increased 1.6% over the prior year period, consisting of a 1.6% increase in pharmacy sales and a 0.1% increase in front-end sales. Front-end same store sales, excluding cigarettes and tobacco products, increased 1.5%. 

Pharmacy sales were negatively impacted by approximately 330 basis points, according to the report, as a result of new generic introductions. The number of prescriptions filled in same stores, adjusted to 30-day equivalents, increased 5.0% over the prior year period driven by strong execution, notably in growing immunizations and medication adherence through personalized interventions, as well as prescription file buys and gaining access to new networks in markets where Rite Aid has strong market presence. Prescription sales from continuing operations accounted for 65.9% of total drugstore sales.

Net loss from continuing operations was $343.5 million, or $6.43 per share compared to last year’s fourth quarter net loss from continuing operations of $255.6 million, or $4.83 per share. 

Income tax expense in the current year’s fourth quarter was impacted by a $320.6 million charge related to an increase in the valuation allowance against the company’s deferred tax asset. 

Other items impacting net loss from continuing operations included a loss on sale of assets in the current year compared to a gain on sale of assets in the prior year, partially offset by a LIFO (last in, first out) credit in the current year compared to a LIFO charge in the prior year.

Adjusted EBITDA from continuing operations was $135.6 million, or 2.4% of revenues for the fourth quarter compared to last year’s fourth quarter adjusted EBITDA from continuing operations of $134.1 million, or 2.5% of revenues. 

Retail pharmacy segment adjusted EBITDA from continuing operations decreased $11.1 million due primarily to a reduction in the Transition Services Agreement (TSA) fee income from Walgreens Boots Alliance Inc.

Pharmacy services segment adjusted EBITDA increased $12.6 million over the prior year due to increased revenues and improvements in pharmacy network management.

For the full fiscal year ended February 29, 2020, revenues from continuing operations were $21.9 billion compared to revenues of $21.6 billion in the prior year, an increase of $0.3 billion or 1.3%. 

Retail pharmacy segment revenues were $15.6 billion, a decrease of 0.9% compared to the prior year. Revenues in the pharmacy services segment were $6.6 billion, an increase of 7.6% compared to the prior year, which, according to the company, was due to an increase in Medicare Part D membership.

Retail pharmacy segment same store sales from continuing operations for the year increased 1.1%, consisting of a 1.4% increase in pharmacy sales and a 0.6% decrease in front end sales. 

Front-end same store sales, excluding cigarettes and tobacco products, increased 0.6% for the year. Pharmacy sales were negatively impacted by approximately 286 basis points as a result of new generic introductions. 

The number of prescriptions filled in same stores, adjusted to 30-day equivalents, increased 3.5% over the prior year resulting primarily from strong execution, notably in growing immunizations and medication adherence through personalized interventions, as well as prescription file buys and gaining access to new networks in markets where we have strong market presence. 

Prescription sales from continuing operations accounted for 67.0% of total drugstore sales.

Net loss from continuing operations for fiscal 2020 was $469.2 million, or $8.82 per share compared to last year’s net loss from continuing operations of $667.0 million, or $12.62 per share. 

The reduction in net loss is due to lower goodwill and intangible asset impairment charges, lower LIFO expense, lower lease termination and impairment charges, and a gain on debt retirements in the current year compared to a loss on debt retirements in the prior year. These items were partially offset by higher income tax expense and higher restructuring-related costs.

Adjusted EBITDA from continuing operations was $538.2 million, or 2.5% of revenues for the year compared to $563.4 million, or 2.6% of revenues for last year. The decrease in adjusted EBITDA is due to a decrease of $34.8 million in the retail pharmacy segment, partially offset by a $9.5 million increase in the pharmacy services segment. 

The decrease in the retail pharmacy segment adjusted EBITDA was driven by a $42.4 million reduction in TSA fee income from WBA. Also contributing to the reduction in Adjusted EBITDA was a decrease in adjusted EBITDA gross profit resulting from reimbursement rate pressures that were not fully offset by generic drug purchasing efficiencies, a reduction in vendor promotional funds and a decline in front-end same store sales. 

These negative variances were partially offset by same-store prescription count growth and lower selling, general and administrative expenses due to strong labor and benefits expense control. The improvement in the pharmacy services segment EBITDA was due to increased revenue and improvements in pharmacy network management.

For the year, the company relocated five stores, finished the last 75 stores with the wellness remodel format, opened two stores, and closed 10 stores.