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Rite Aid posts loss of 26 cents per share

HARRISBURG — Rite Aid reported a second-quarter loss of $67.9 million, or 26 cents per share, on Monday primarily because of costs associated with store closings and acquiring pharmacy-benefits manager PCS Health Systems Inc.

Revenues for the nation's third-largest drugstore chain were $3.5 billion for the quarter ended Aug. 28, up 16.6 percent from $3.01 billion in the same period last year, the company said. The company said the results were preliminary and unaudited.

"We are disappointed with second-quarter results, but we believe we are taking the steps necessary to deliver better operating results and to restore the financial health of the business,'' Martin Grass, chairman and chief executive officer of Rite Aid, said in a statement. "The fundamentals of the business are intact.''

Rite Aid closed or moved 106 stores during the quarter, resulting in pre-tax charges of about $34 million, the company said. Also hurting the results was a $49 million increase in interest costs related to financing for the January acquisition of PCS, the retailer said.

Rite Aid did not provide comparative earnings figures, because the company plans to restate earnings for prior years and interim periods to make adjustments related to the store closings. Rite Aid had reported a loss of $92.7 million, or 31 cents a share, for its fiscal second quarter of 1998.

Rite Aid said sales at store open at least a year were up 8 percent, boosted by prescription sales growth of 17.5 percent.

The company said non-pharmacy sales have been improving since September. For the June-August period, so-called front-end sales were 3.5 percent lower than for the same period last year. The company increased its East Coast sales but was hurt by declines on the West Coast, where the company has agreements to sell 38 stores and hopes to sell another 250.

"Our basic strategy remains intact,'' Grass said in a presentation to investors. "We will execute and do a better job than we did in the past 12 months.''

Rite Aid scheduled its announcement after the close of the stock market Monday. The company's stock closed Monday down $2.50 for the day at $10 on the New York Stock Exchange.

Rite Aid is trimming costs with the store sales, the closing of a distribution center in Utah, and cuts in its corporate and field staff.

The company has considered selling at least some of its interest in PCS to help with financial problems, and Grass said the company would likely get more than the $1.5 billion it paid. The purchase from Eli Lilly & Co. increased Rite Aid's debt to $5.1 billion.

In March, Rite Aid reported a 39 percent drop in fourth-quarter earnings -- from $119.7 million to $73 million -- that it attributed to a flurry of store openings.

The Camp Hill, Pa.-based company has about 3,800 store locations in 30 states.



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