After announcing its Q3 revenues missed market expectations, shares of retail drugstore name Rite Aid (RAD 2.05, -0.06) trade 2.8% lower. Shares have given up the majority of gains from late-November when the company announced the first closing of store sales to Walgreens Boot Alliance (WBA 71.35, -4.16 -5.5%), yet the stock sits comfortably above the early-November lows of $1.38.
In Q3, revenues from continuing operations were down about 5.6% to $5.4 billion. Retail Pharmacy Segment revenues were $4.0 billion and decreased 3.0% compared to the prior year period primarily as a result of a decrease in same store sales and reimbursement rates. Revenues in the company’s Pharmacy Services Segment were $1.4 billion and decreased 12.2% compared to the prior year period, due to an election to participate in fewer Medicare Part D regions and a decline in commercial business.
Same store sales from continuing operations for Q3 were down 2.5% consisting of a 3.5% decrease in pharmacy sales and a 0.5% decrease in front-end sales. Pharmacy sales included an approximate 198 basis point negative impact from new generic introductions.
Additionally, the number of prescriptions filled in same stores, adjusted to 30-day equivalents, decreased 2.4% from the prior year period due in part to exclusion from certain pharmacy networks that Rite Aid participated in the prior year. Prescription sales from continuing operations accounted for 66.5% of total drugstore sales.
In total, adjusted net income from continuing operations was $1.6 million or $0.00 per diluted share compared to last year’s Q3 adjusted net income from continuing operations of $26.8 million or $0.03 per diluted share. The decline in adjusted net income was due to a decline in adjusted EBITDA, partially offset by a reduction in adjusted income tax expense.
In Q3, the company opened 1 store, relocated 9 stores, remodeled 20 stores and expanded 1 store, bringing the total number of wellness stores chainwide to 2,505. The company sold 97 stores to WBA and closed 7 stores, resulting in a total store count of 4,404 at the end of the third quarter.
The third quarter was a busy time for RAD in preparing for and beginning the transfer of stores and related assets to WBA. To date, the company has transferred 357 stores and have received about $715 million in proceeds, which it has used to pay down debt. RAD and WBA expect to continue to transfer ownership of the stores in phases over the coming months.