Rite Aid Plunges on Cut to Forecast as Cold-Drug Sales Sink
(Bloomberg) -- Rite Aid Corp. shares declined as much as 20% in late trading after the drugstore chain warned that its full-year results would be worse than expected, in part due to disappointing winter sales.
Sales of some drugstore staples have been notably weak of late, the company said, with a decline of nearly 37% in cough, cold and flu-related product categories. Flu cases have been down sharply this year as a result of social distancing, masking and other measures taken to blunt the Covid-19 pandemic.
The company expects to report adjusted earnings before interest, taxes, depreciation and amortization of $425 million to $435 million for the fiscal year that ended in February. That’s down from its previous forecast of $490 million to $520 million, according to a statement issued after the stock-market close on Wednesday.
Rite Aid said winter weather also weighed on sales, and that low demand for some kinds of medical care had a harmful effect on prescription levels.
“During the fourth quarter our industry was impacted by a historically soft cough, cold and flu season, as well as the continued impacts of Covid on the deferral of elective procedures and related acute prescription volume and selling, general and administrative expenses,” Chief Executive Officer Heyward Donigan said in a statement.
Shares of Rite Aid were down 17% at 4:44 p.m. in New York, rolling back a large chunk of the 47% gain they had booked this year through Wednesday’s close.
Investors also signaled they viewed Rite Aid’s announcement as a harbinger of similar woes for the pharmacy operator’s biggest rivals. Shares of Walgreens Boots Alliance Inc. declined 3.4% in late trading, and CVS Health Corp. was down 1.3%.
Rite Aid said that same-store sales, a key metric for retailers, slid 5.6% for front-end items in its fourth quarter, which ended Feb. 28. They had fallen 0.7% in the third quarter. At the same time, costs climbed as it paid employees hero pay and sick leave and cleaning expenses increased.
The company is scheduled to release full quarterly results next month.
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