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Rite Aid Forecasts Full-Year Loss, Lower Adjusted Ebitda

Rite Aid blames weak flu season sales, bad weather for lowered outlook.
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Rite Aid  (RAD)  shares slumped after the drugstore chain estimated that for fiscal 2021 it would post a net loss and lower adjusted Ebitda.

At last check Rite Aid shares were off 18% at $19.12. They closed the regular trading session on Wednesday down 2.4% at $23.34. On Jan. 28 they had set a 52-week high of $32.48.

For the fiscal year ended Feb. 27, Rite Aid now expects adjusted earnings before interest, taxes, depreciation and amortization to range $425 million to $435 million. 

In December the Camp Hill, Pa., company had estimated adjusted Ebitda at $490 million to $520 million. 

The company now expects revenue of about $24 billion, with same-store sales about 3.5% higher compared with fiscal 2020. 

The chain previously estimated revenue for the full year in a range of $23.9 billion to $24.2 billion. It had pegged comparable sales up in a range of 3.5% to 4.5%.

Rite Aid on Wednesday estimated its net loss at $90 million to $100 million for fiscal 2021. In December it had estimated that year net loss at $89 million to $114 million.

The company in its update didn't specify an adjusted estimate per share for the year. In December Rite Aid had said that it expected adjusted earnings for the year of 45 cents to 85 cents a share.

Analysts surveyed by FactSet are estimating full-year adjusted earnings of 49 cents a share.

The revised full-year estimates were prompted because a "soft" cough, cold and flu season hurt fourth-quarter results, President and Chief Executive Heyward Donigan said in a statement.

Other factors: COVID-19 prompted customers to defer elective procedures, hurting prescriptions for acute care. And inclement weather hurt Rite Aid's supply chain and company sales.

Front-end comparable-store sales for the fourth quarter fell 5.6%. This was driven by a 37% drop in cough, cold and flu categories, which in turn disproportionately hurt gross profit because these products carry wider profit margins, Rite Aid said. 

In the quarter, same-store prescriptions dropped 1%, particularly driven by a 14% decline in acute-care scrips.

Selling, general and administrative expense was boosted by bonuses for staff who worked through the pandemic, the costs of cleaning due to the pandemic, sick leave tied to the pandemic and other matters.

Going forward, the company said, acute-care prescriptions returned to positive levels in March and Rite Aid is significantly increasing the number of vaccines that it is administering.

The company expects to report fourth-quarter and full fiscal year results on April 15.