CAMP HILL, Pa.--(BUSINESS WIRE)--Rite Aid Corporation (NYSE: RAD) today reported operating results for its third fiscal quarter ended November 28, 2020.

For the third quarter, the company reported net income from continuing operations of $4.3 million, or $0.08 income per share, Adjusted net income from continuing operations of $21.6 million, or $0.40 income per share, and Adjusted EBITDA from continuing operations of $137.4 million, or 2.3 percent of revenues.

“We are pleased with our third quarter performance as we continue to grow our business and achieve major physical and digital milestones through our RxEvolution strategy,” said Heyward Donigan, president and chief executive officer, Rite Aid. “We officially launched our new brand and logo, made substantial progress in evolving our merchandise mix to an assortment that best supports whole health, refreshed over 700 store exteriors, opened the first three new Store of the Future prototypes and began the integration of our two legacy PBMs. On the digital side, we launched a completely modernized Rite Aid online experience and mobile app and are set to launch our new member portal at Elixir.”

“Our teams are working hard to serve our customers during these challenging times. We have administered over one million COVID-19 tests and will be partnering with the CDC to help administer COVID-19 vaccines in our communities. I am so proud of our 50,000 associates and the strategic progress we’re making in our journey to revolutionize our industry and elevate our role as an indispensable healthcare provider. We are accelerating the key initiatives that support our strategy, and we will continue to deliver the operational excellence needed to achieve strong results as we generate cash flow, reduce debt and improve our leverage ratio.”

Consolidated Third Quarter Summary

(dollars in thousands)	Thirteen Week Period Ended				Thirty-nine Week Period Ended
November 28, 2020	November 30, 2019	November 28, 2020	November 30, 2019
Revenues from continuing operations	$	6,117,038	$	5,462,298	$	18,126,384	$	16,201,151
Net income (loss) from continuing operations	4,324	52,286	(81,575)	(125,758)
Adjusted EBITDA from continuing operations	137,405	158,090	396,400	402,627

Revenues from continuing operations for the quarter were $6.12 billion compared to revenues from continuing operations of $5.46 billion in the prior year’s quarter. The increase in revenues was driven by growth at both the Retail Pharmacy and Pharmacy Services segments.Net income from continuing operations was $4.3 million, or $0.08 per share, compared to last year’s third quarter net income from continuing operations of $52.3 million, or $0.98 per share. The decline in net income was due primarily to a $55.7 million gain on debt retirements in the prior year and a decrease in Adjusted EBITDA, partially offset by lower restructuring-related costs and a higher gain on sale of assets resulting from the sale-leaseback of the company’s Perryman, MD distribution center.

Adjusted EBITDA from continuing operations was $137.4 million, or 2.3 percent of revenues, compared to last year’s third quarter Adjusted EBITDA of $158.1 million, or 2.9 percent of revenues.

Retail Pharmacy Segment

(dollars in thousands)	Thirteen Week Period Ended				Thirty-nine Week Period Ended
November 28, 2020	November 30, 2019	November 28, 2020	November 30, 2019
Revenues from continuing operations	$	4,109,592	$	3,909,946	$	12,250,775	$	11,622,858
Adjusted EBITDA from continuing operations	88,557	108,579	273,879	285,260

Retail Pharmacy Segment revenues from continuing operations increased 5.1 percent over the prior year quarter. Same store sales from continuing operations for the third quarter increased 4.3 percent over the prior year period, consisting of a 6.1 percent increase in pharmacy sales and a 0.7 percent decrease in front-end sales. Front-end same store sales, excluding cigarettes and tobacco products, increased 0.3 percent. Front-end sales benefited from increases in immunity, first aid and paper products, offset by decreases in over-the-counter products related to cough cold and flu and Halloween candy sales. The company increased its retail script share1, and also increased its front-end market share in both dollars and in unit sales2. The number of prescriptions filled in same stores, adjusted to 30-day equivalents, increased 3.1 percent over the prior year period driven by increases in maintenance prescriptions, supported by personalized Medication Therapy Management interventions and home deliveries. Flu immunizations increased by 28 percent over the prior year period, which offset a 19 percent decline in acute scripts related to cough cold and flu. In total, acute prescriptions decreased by 1.9 percent.Retail Pharmacy Segment Adjusted EBITDA from continuing operations was $88.6 million, or 2.2 percent of revenues, for the third quarter compared to last year’s third quarter Adjusted EBITDA from continuing operations of $108.6 million or 2.8 percent of revenues. Gross profit dollars increased due to increased revenues, but gross margin rate declined due to reimbursement rate pressure and the impact of the reduction in over-the-counter front-end sales. Selling, general and administrative (SG&A) expenses improved as a percentage of sales, but SG&A dollars increased due to incremental costs associated with the COVID-19 pandemic and the absence of Transition Services Agreement income in the current quarter, as services under that agreement have been completed.

1 – Source: IQVIA RxInsight. Share based on 30-day equivalent scripts in Rite Aid operating area.

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

Pharmacy Services Segment

(dollars in thousands)	Thirteen Week Period Ended				Thirty-nine Week Period Ended
November 28, 2020	November 30, 2019	November 28, 2020	November 30, 2019
Revenues from continuing operations	$	2,084,402	$	1,613,109	$	6,100,026	$	4,758,470
Adjusted EBITDA from continuing operations	48,848	49,511	122,521	117,367

Pharmacy Services Segment revenues were $2.1 billion, an increase of 29.2 percent compared to the prior year period. The increase in revenues was primarily the result of an increase of 252,000 Medicare Part D members.

Pharmacy Services Segment Adjusted EBITDA from continuing operations was $48.8 million, or 2.3 percent of revenues, for the third quarter and was flat to last year’s third quarter Adjusted EBITDA from continuing operations of $49.5 million, or 3.1 percent of revenues. The increase in revenues was offset by a decline in Adjusted EBITDA as a percent of revenues. The Pharmacy Services Segment benefited from reductions in payroll and indirect spend overall, but these benefits were offset by increased drug costs within Medicare Part D and SG&A spend related to an increase in Medicare Part D members. The Company expects Medicare Part D membership to decrease in fiscal 2022, but expects these members to be more profitable.

Outlook for Fiscal 2021

Rite Aid Corporation is narrowing its fiscal 2021 guidance. The company’s key guidance assumptions are as follows:

• Benefits from initiatives to drive retail sales growth, offset by the impact of a less severe cough, cold and flu season on front end over-the-counter sales and related prescriptions;
• A reduction in Medicare Part D membership beginning January 1;
• Strong expense control across both the Retail Pharmacy and Pharmacy Services segments, offset by additional retail operating expenses caused by the recent increase in COVID-19 cases across many of our markets; and
• Continued improvements in pharmacy network management at Elixir.

Rite Aid Corporation expects revenues to be between $23.9 billion and $24.2 billion in fiscal 2021 with same store sales expected to range from an increase of 3.5 percent to an increase of 4.5 percent over fiscal 2020.

Net loss is expected to be between $114 million and $89 million.

Adjusted EBITDA is expected to be between $490 million and $520 million.

Adjusted net income per share is expected to be between $0.45 and $0.85.

Capital expenditures are expected to be approximately $325 million, which includes our previously announced acquisition of Bartell Drugs.

Free cash flow is expected to be between $50 million and $100 million.

About Rite Aid Corporation

Rite Aid Corporation is on the front lines of delivering healthcare services and retail products to more than 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.