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
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
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.