Updated from 10:52 a.m. EDT
Bucking the current retail trend, drugstore chain
expressed optimism about its third quarter and raised its full-year outlook after announcing second-quarter results.
Rite Aid said its second-quarter loss narrowed, as sales increased 4.5% and interest expense decreased 17% from the year-ago period.
The nation's third-largest drugstore chain reported a second-quarter net loss of $105.3 million, vs. a loss of $245.9 million a year ago. Last year's results include a $66.6 million charge for early termination of debt. The loss per share was 21 cents, compared with 54 cents a year ago. Before items, the company lost 10 cents a share. On that basis, analysts had been expecting a loss of 13 cents a share, according to Thomson Financial/First Call.
The stock was trading up 7 cents, or 3.2%, at $2.26, following the earnings release on Tuesday.
Indeed, the news from Rite Aid was better than it has been from other retail segments. On Monday, bellwethers
Federated Department Stores
warned of disappointing September sales.
By contrast, Rite Aid said it is forecasting same-store sales growth of 7% to 8% for the third quarter. Arguably, the need for prescription drugs could make Rite Aid somewhat immune to a downturn in consumer spending -- after all, people require medication more than they do discount goods and clothing.
During the second quarter, Rite Aid's total sales increased to $3.9 billion from $3.7 billion a year ago, benefiting primarily from a 10.8% gain in prescription drug sales on the year.
Rite Aid reported second-quarter earnings before interest, taxes, depreciation and amortization of $125.4 million, or 3.3% of sales. This compares with $99 million, or 2.7% of sales, last year.
The drugstore retailer expects third-quarter EBITDA of $120 million to $130 million, up from $77.5 million a year ago. It raised guidance for 2003 to a range of $565 million to $600 million from a prior range of $545 million to $595 million.
On a conference call, Rite Aid said it was committed to 20% EBITDA growth in 2003. Executives also said the company could be profitable in the fourth quarter, if it makes the high end of its guidance.
"We are very pleased with our results," said Bob Miller, chief executive officer of Rite Aid. The company has been engaged in a turnaround plan, after accounting irregularities forced the company's management to resign in 1999.
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