Rebounding Rite Aid posts strong earnings

April 04, 1995|By Jay Hancock | Jay Hancock,Sun Staff Writer

Rite Aid Corp. wrapped up the year of its rebound with a jump in quarterly profits and more impressive sales increases, but the drug-store chain's profit margins remain under pressure from cost-cutting health insurers.

Not counting one-time charges and discontinued operations from a year ago, profits for the three months that ended March 4 rose 23.9 percent, to $53.3 million, or 63 cents a share, the Camp Hill, Pa.-based retailer said yesterday. Earnings were in the range expected by financial analysts.

For the fiscal year, Rite Aid's net profit jumped to $141.3 million, or $1.67 per share, from $9.3 million in the previous period.

The prior-year results were hurt by several big charges to close bad stores and sell sideline businesses, exaggerating the apparent size of last year's recovery.

But the Rite Aid revival is real, said analysts, who were particularly impressed with the company's sales results. Driven by new store layouts and supply contracts with health insurers, revenue in stores open for at least a year rose 9.0 percent last quarter, up from a 1.8 percent gain, and 7.2 percent for the year, up from 2.8 percent.

Financial experts consider such "same-store" sales an important measure of retail health because they discount the revenue boost from new stores. Another factor increasing Rite Aid's sales is the installation of computerized reordering systems that keep popular goods in stock.

Rite Aid also has closed underperformers and made the decision to sell nondrugstore affiliates. Rite Aid stock closed yesterday at $24.50, unchanged on the day, and up 56 percent from last year's low of $15.75.

But the company, the nation's No. 2 drug chain as measured in sales, can't relax. Health maintenance organizations keep putting pressure on pharmacy profit margins and steering exclusive contracts to low-cost sources. Continued growth in Rite Aid's sales and earnings will depend on how well it reacts to that trend, analysts said.

"When you get right down to it, this is still a drugstore," said Juan Noble, who follows Rite Aid for New York investment house Jackson Partners & Associates. "They go the way the prescriptions go."

The company's total sales last fiscal year were $4.53 billion, up 11.7 percent.

TF

Rite Aid Corp. ... ... ... ... ... .. Ticker .... ... Yesterday's

Camp Hill, Pa. ... ... .... ... ... .. .. Symbol ... ... Cls. ... Chg.

... ... ... ... ... ... ... ... ... .. .. RAD ... ... .. 24 1/2 unch

Period ended

3/04 ... ... ... ... ... ... .. 4th qtr. ... .. .. Year ago ... .Chg.

Revenue ... ... ... ... ... ... $1,353,766 ... ... $1,077,438 .. +25.6%

Net Income ... ... ... .. .. .. $53,254 ... ... .. ($71,416) ... --

Primary EPS ... ... ... ... ... $0.63 .... ... ... ($0.81) ... ..--

... ... ... ... ... ... ... ... 12 mos. ... ... ...Year ago ... .Chg.

Revenue ... ... ... ... ... ... $4,533,851 ... ... $4,058,711 ...+11.7%

Net Income ... ... ... ... ... $141,286 ... ... .. $9,288 ... ...+1,421.2%

Primary EPS ... ... ... ... .. $1.67 ... ... .. .. $0.11 ... ... +1,418.2%

Figures in thousands (except per share data)

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