Updated from 9:43 a.m. EDT

Drugstore chain

Rite Aid

(RAD) - Get Report

expects to pick up new customers in the midst of

CVS'

(CVS) - Get Report

re-branding of the 1,260

Eckerd

drugstores it recently bought from

J.C. Penney

(JCP) - Get Report

.

"We believe that there is always opportunity to gain new customers when there is a change

in the competitive landscape, and we are fully prepared and working with our stores ... to gain new customers," Rite Aid said Thursday on a post-earnings conference call with analysts.

Earlier, Rite Aid reported a first-quarter profit that easily beat Wall Street's consensus estimate. But while the company boosted its 2005 earnings guidance, it lowered its yearly sales forecast.

Shares of Rite Aid were moving 6% higher, lately up 30 cents to $5.29 in Thursday trading.

Rite Aid said about 25% to 30% of its retail stores overlap with current Eckerd stores, mostly in the Northeast and Central regions of the U.S. "Certain markets have significant overlap," the company said.

CVS

said on May 5 that it plans to close 225 underperforming Eckerd drugstores after the transaction with J.C. Penney closes sometime in July. CVS first announced the $2.15 billion acquisition, which also includes Eckerd's pharmacy benefits management and mail-order business,

on April 5.

Rite Aid itself had

entered the bidding war to buy the Eckerd chain in February, reportedly offering up to $4 billion in cash and stock.

For its first quarter, Rite Aid earned $63.3 million, or 10 cents a share, compared with a loss of $38.8 million, or 8 cents a share, a year ago. Analysts were expecting a profit of 5 cents a share.

Sales in the quarter rose to 4.9% to $4.2 billion from $4 billion in the year-earlier period. Same-store sales were up 5.3%, with pharmacy same-store sales up 5.4% and front-end same-stores sales increasing 5.2%.

Rite Aid said it retained many of the customers it acquired during the Southern California grocery workers' strike, which lasted from October 2003 until February of this year. The company did not quantify that statement, but said front-end and pharmacy sales had the most positive benefit.

"We feel really good about our Southern California stores hanging onto the customers they picked up during the strike," the company said. Rite Aid has about 360 stores in California.

Analysts had speculated toward the start of the strike that national drugstores with a presence in California could see a premium from the labor dispute as customers who normally purchased prescription drugs and grocery items at affected supermarkets moved to drugstores which also sold consumables, like milk and orange juice.

Rite Aid said earnings before taxes, interest, amortization and deprecation were $223.7 million on an adjusted basis in the latest quarter, up from $175.1 million a year ago. That was the highest amount of adjusted EBITDA since the company began its turnaround four years ago.

Rite Aid also said it did not have a charge related to debt modification in the quarter, which is what pulled down results in the comparable quarter last year. In addition, the company recorded a $4.6 million gain from a store closing and impairment credit; it had a similar charge a year ago.

Higher sales of generic prescriptions added 83 basis points to pharmacy same-store sales, the company said, while inflation also boosted pharmacy same-store sales. Meanwhile, sales of front-end consumables were "outstanding." The company introduced 45 new Stock Keeping Units (SKUs) during the quarter.

Prescription sales made up 64.6% total sales, while third-party pharmacy sales accounted for 93.7% of pharmacy sales.

"Our team did an excellent job of leveraging sales increases, improving gross margin and containing costs," the company said in a statement.

Rite Aid said it currently has two pilot stores testing a new store set-up, which will be ready for customer feedback in the third quarter. The stores are more customer-centric with wider aisles and 25% more space for merchandise.

Looking forward, the company plans to launch a television advertising campaign in 33 markets in August.

Camp Hill, Pa.-based Rite Aid increased its 2005 earnings estimate to $121 million to $167 million, up from a prior estimate of $112 million to $157 million. The company cited expected lower tax expenses and a decrease in non-cash stock compensation for the higher earnings.

However, sales are seen at $17.2 billion to $17.4 billion with same-store sales up 4.5% to 5.5%. That compares with prior guidance of $17.4 billion to $17.6 billion and same-store sales growth of 5.5% to 6.5%. The company said it expects a decrease in sales of generic prescriptions.

Analysts are expecting 26 cents a share in earnings and $17.56 billion in sales in 2005.