Rite Aid Corp. RAD, an operator of retail drugstore chains in the U.S., tumbled to a 52-week low on Thursday on the heels of reporting revenues that missed analyst estimates and a weak earnings outlook for fiscal 2020.
The Camp Hill, Pennsylvania-based company reported revenue of $5.38 billion for the three months ending March 2, down $0.01 billion from the prior-year quarter and $0.18 billion from the Refinitiv consensus estimate of $5.56 billion. Adjusted net losses of 1 cent per share slightly outperformed the consensus estimate by 1 cent.
Company reports net losses for fiscal 2019
Rite Aid reported net losses of $667 million for fiscal 2019, up $317.5 million from fiscal 2018, driven by increased goodwill and intangible asset charges, increased lease termination and impairment charges and the absence of a gain resulting from the merger termination with Walgreens Boots Alliance Inc. (WBA).
Shares reach new 52-week low on weak fiscal 2020 outlook
Rite Aid reached a new 52-week low of 49 cents during the morning, down approximately 13.67% from Wednesday’s close, following management’s comments on earnings guidance for fiscal 2020. Although declines in reimbursement rates are expected to remain consistent with the rates for fiscal 2019, Rite Aid said it might not be able to offset the declines with generic drug purchasing savings as in fiscal 2019. Based on this, management expects fiscal 2020 adjusted EBITDA to range between $500 million and $560 million, down between $3.4 million and $63.4 million from fiscal 2019 adjusted EBITDA of $563.4 million.
GuruFocus ranks Rite Aid’s profitability 3 out of 10 on several warning signs, which include a weak Piotroski F-score of 3, a three-year revenue decline rate of 7.7% and a Sloan ratio that indicates low earnings quality. Additionally, Rite Aid’s operating margin has contracted approximately 24.50% per year over the past five years and is underperforming 73% of global competitors.
Gurus clinging onto the struggling pharmaceutical retailer include Joel Greenblatt (Trades, Portfolio) and 2019 Value Conference speaker Mario Gabelli (Trades, Portfolio).
Management approves 1-for-20 stock split to prevent delisting
Rite Aid’s board of directors approved a 1-for-20 stock split to comply with New York Stock Exchange listing requirements. The NYSE begins the delisting process for a stock if the stock trades below $1 for 30 consecutive trading days. The transaction, which is due to take place on April 22, is expected to reduce the company’s total shares outstanding from approximately 1.08 billion to approximately 54 million.
Disclosure: No positions.
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