CAMP HILL, Pa.--(BUSINESS WIRE)--Rite Aid Corporation (NYSE: RAD) today reported operating results for its first fiscal quarter ended May 30, 2020.

For the first quarter, the company reported net loss from continuing operations of $72.7 million, or $1.36 per share, Adjusted net loss from continuing operations of $2.0 million, or $0.04 per share, and Adjusted EBITDA from continuing operations of $107.4 million, or 1.8 percent of revenues.

“I couldn’t be more proud of how our teams have worked tirelessly to support and care for our communities during these unprecedented times, while continuing to push forward in achieving our vision for the future,” said Heyward Donigan, president and chief executive officer, Rite Aid. “Our Retail Pharmacy teams responded to the COVID-19 crisis by taking immediate action to maintain our supply chain and stay in stock, enhance our digital experience, quickly implement safety measures, keep our stores open and provide outstanding service, all of which helped us drive double-digit front-end sales growth and gain retail market share. In the Pharmacy Services Segment, our full leadership team is now in place, and our team has made excellent progress in integrating the assets of EnvisionRxOptions, soon to be renamed Elixir, as we continue the integration with Rite Aid.

“There are certainly challenges brought about by COVID-19, including the decline in acute prescriptions and increased costs incurred to assure the safety of our associates and customers. No matter the challenge, we can execute our strategy and deliver day-to-day operational excellence in the face of a pandemic. I am amazed by the passion and spirit of our more than 50,000 associates, who have come to work every day driven by a desire to help customers stay healthy and demonstrating the essential role of pharmacy in our communities. Thanks to their hard work, the fundamentals of our business are strong, and we are right on track with the launch of our new RxEvolution strategy. I am excited to continue this important work as we look to become a leading mid-market PBM, unlock the value of our pharmacists and revitalize our retail and digital experiences.”

First Quarter Summary

Revenues from continuing operations for the quarter were $6.03 billion compared to revenues from continuing operations of $5.37 billion in the prior year’s quarter. Retail Pharmacy Segment revenues were $4.12 billion and increased 6.7 percent compared to the prior year period due to an increase in same store sales. Revenues in the Pharmacy Services Segment were $1.98 billion, an increase of 26.2 percent compared to the prior year period, which was primarily due to an increase in Medicare Part D membership of approximately 252,000 compared to the prior year period.

Retail Pharmacy Segment same store sales from continuing operations for the first quarter increased 6.6 percent over the prior year period, consisting of a 14.2 percent increase in front-end sales and a 2.2 percent increase in pharmacy sales. Front-end same store sales, excluding cigarettes and tobacco products, increased 16.0 percent, driven by increases in general cleaning products, sanitizers, wipes, paper products, liquor, over-the-counter products and summer seasonal items. The company increased its front-end market share by 270 basis points in both dollar and unit sales1. The number of prescriptions filled in same stores, adjusted to 30-day equivalents, increased 0.4 percent over the prior year period driven by increases in maintenance medication fills, supported by personalized Medication Therapy Management interventions and home deliveries, partially offset by a reduction in acute prescriptions of 14.8 percent resulting from the postponement of outpatient medical visits and elective surgical procedures in connection with the COVID-19 pandemic. Prescription sales from continuing operations accounted for 64.2 percent of total drugstore sales.

Net loss from continuing operations was $72.7 million, or $1.36 per share compared to last year’s first quarter net loss from continuing operations of $99.3 million, or $1.88 per share. The improvement in net loss was due primarily to a LIFO credit in the current year compared to a LIFO charge in the prior year, an income tax benefit in the current year compared to income tax expense in the prior year, and lower restructuring-related costs, partially offset by intangible asset impairment charges relating to the rebranding of the Pharmacy Services Segment to its new brand name, Elixir.

Adjusted EBITDA from continuing operations was $107.4 million or 1.8 percent of revenues for the first quarter compared to last year’s first quarter Adjusted EBITDA from continuing operations of $110.3 million or 2.1 percent of revenues. Retail Pharmacy Segment Adjusted EBITDA from continuing operations decreased $21.0 million due primarily to the impact of the COVID-19 pandemic and the completion of services provided under the Transition Services Agreement. Although our Retail Pharmacy Segment benefited from increased front-end sales, the reduction in acute prescription count and incremental expenses for payroll and other operating costs resulted in a combined net negative impact from COVID-19 of approximately $30.0 million in the quarter. Pharmacy Services Segment Adjusted EBITDA increased $18.1 million over the prior year due to increased revenues and improvements in pharmacy network management.

1 – Source: IRI. Excludes tobacco, cigarettes, greeting cards and online sales. For drug store channel during Rite Aid’s first fiscal quarter.

Rite Aid on the Front Lines of the COVID-19 Crisis

Rite Aid is on the front lines of providing communities with essential care, services and products and took the following actions during the COVID-19 pandemic to serve its customers and communities:

• Worked with the U.S. Department of Health and Human Services to be early adopters of COVID-19 testing, launching 97 sites with the capacity to conduct more than 48,000 tests each week.
• Provided additional support specific to associate pay and safety, including our Hero Pay program that ran from March 15 to May 16, 2020, a $1,000 Hero Bonus for retail store management, Pandemic Pay, Administrative Leave, and various in-store safety procedures.
• Through The Rite Aid Foundation, committed $6 million to support healthcare providers and first responders, regional hot spots, community needs and The Rite Aid Foundation Associate Relief Fund.
• Hired approximately 6,000 full and part-time associates to support store and distribution center teams.
• Instituted “Pandemic Pay” policy that ensures associates are compensated if diagnosed with the virus or quarantined because of exposure.
• Implemented specific internal protocols to keep associates safe and ready to serve customers, including the installation of Plexiglas shields at pharmacy and front-end counters to provide additional protection.
• Ensured contact-less capabilities at our stores for prescription pickup and payment.
• Expanded home delivery of front-end items through a new partnership with Instacart.
• Launched a new telehealth service Rite Aid Virtual Care to better serve patient needs.
• Established social distancing procedures that include marking floor areas in front of the pharmacy and front-end counters with tape to ensure 6-foot separation.
• Waived delivery-service fees for eligible prescriptions.
• Followed enhanced cleaning and sanitization protocols designed specifically to prevent the spread of a wide spectrum of viruses, including COVID-19 and influenza.

During the first three weeks of June, the company saw continued increases in comparable front-end sales of 7.2 percent excluding cigarettes and tobacco products over the same prior year period, due to demand for personal care, paper products and OTC medications. We believe our continued strong front-end performance is due to good in-stock positioning through vendor partnerships and store-level execution, success with keeping stores open for longer hours compared to competitors and maintaining a safe and clean store experience for associates and customers. Same store prescription counts during the first three weeks of June increased 80 basis points over the same prior year period due to a lessening impact of acute prescription declines, which decreased by 11.7 percent.

In addition, we continue to closely manage and reduce costs. We have recently eliminated 254 corporate office positions across both our Retail Pharmacy and Pharmacy Services segments. We have also taken steps to reduce other expenses, such as shrink, advertising, rent, travel and call center expenses. In total, we expect these reductions to result in savings of over $40 million in Fiscal 2021 that were not included in our original guidance and over $55 million on a run rate basis. The company expects to incur severance costs of $7 million related to the elimination of corporate positions, which will be classified as a restructuring expense.

The company currently has liquidity of approximately $1.7 billion, which consists of availability to borrow under our secured revolving credit facility of approximately $1.52 billion and cash on hand of approximately $180 million.

Outlook for Fiscal 2021

Due to the significant uncertainty that continues to exist around the severity and duration of the COVID-19 pandemic and the related potential impacts on our business, particularly on acute prescription volume, SG&A expense and Pharmacy Services Segment membership, the company is withdrawing the Fiscal 2021 guidance issued on March 16, 2020. The company does expect to generate positive free cash flow in Fiscal 2021, in part by reducing costs, improving working capital and reducing expected capital expenditures from our original guidance of $350 million to $275 million.

About Rite Aid Corporation

Rite Aid Corporation is on the front lines of delivering health care services and retail products to over 1.6 million Americans daily. Our pharmacists are uniquely positioned to engage with customers and improve their health outcomes. We provide an array of whole being health products and services for the entire family through over 2,400 retail pharmacy locations across 18 states. Through Elixir, we provide pharmacy benefits and services to approximately 4 million members nationwide. For more information, www.riteaid.com.