Rite Aid Corporation (NYSE:RAD) today reported operating results for its fiscal first quarter ended May 31, 2014. The company reported revenues of $6.5 billion, net income of $41.4 million or $0.04 per diluted share, and Adjusted EBITDA of $282.6 million, or 4.4 percent of revenues.
“In the first quarter, we delivered a strong store operating performance, highlighted by increases in same-store sales and same-store prescription count,” said Rite Aid Chairman and CEO John Standley. “As we work through managing the higher-than-expected drug costs and reimbursement rate pressure that affected our financial results for the quarter, we remain focused on executing our strategy to expand our health care offering and transform Rite Aid into a growing retail health care company.”
First Quarter Summary
Revenues for the quarter were $6.5 billion versus revenues of $6.3 billion in the prior year’s first quarter. Revenues increased 2.7 percent primarily as a result of an increase in pharmacy same store sales.
Same store sales for the quarter increased 3.1 percent over the prior year. Front-end same store sales were flat compared to the prior-year period while pharmacy same store sales increased 4.6 percent. Pharmacy sales included an approximate 143 basis point negative impact from new generic introductions. The number of prescriptions filled in same stores increased 2.3 percent over the prior year period. Prescription sales accounted for 68.4 percent of total drugstore sales, and third party prescription revenue was 97.4 percent of pharmacy sales.
Net income was $41.4 million or $0.04 per diluted share compared to last year’s first quarter net income of $89.7 million or $0.09 per diluted share. The decline in net income resulted primarily from a decrease in Adjusted EBITDA and higher income tax expense, partially offset by lower interest expense and a lower LIFO charge.
Adjusted EBITDA (which is reconciled to net income on the attached table) was $282.6 million or 4.4 percent of revenues for the first quarter compared to $344.8 million or 5.5 percent of revenues for the like period last year. The decrease in Adjusted EBITDA was driven by a reduction in pharmacy gross profit due to lower reimbursement rates that were not offset with reductions in generic costs, as well as higher salary and payroll related expenses.