- Even as Rite Aid sales increased by more than 12% in the first quarter, the pharmacy retailer operated at a loss for the period, according to a press release.
- Rite Aid’s first-quarter net loss was $72.7 million, an improvement over the prior year’s loss that the company attributed to a credit under its financial reporting method . During the quarter, the retailer also took on new costs associated with COVID-19, including hiring an additional 6,000 associates for its store and distribution staff..
- As the retailer continues to struggle to make a profit, it announced a exchange offer on 750 million dollars of bonds maturing in 2023. The exchange would extend their maturity to 2026 in exchange for a higher interest rate.
Overview of the dive:
Rite Aid says he’s been on the “front lines” of the COVID-19 crisis, with the company’s stores open as essential retail businesses as the pandemic escalated in the United States and nearly 100 of those stores became testing centers for the disease .
Its position as a pharmacy in the midst of a global healthcare crisis is reflected in the numbers. Revenues from its Retail Pharmacy segment increased 6.7% year-on-year, reaching $4.1 billion. Rite Aid retail showed even stronger improvement, with the fsame-store front-end sales (excluding tobacco products) up 16% driven by increases in cleaning products, sanitizers, wipes, paper products, liquors, over-the-counter products and seasonal items d summer, according to the company.
Despite the surge in revenue, Rite Aid’s results continued to struggle as COVID-19 costs and other expenses took their toll, and as a service contract with Walgreens came to an end. In addition to additional hires, Rite Aid has provided store manager bonuses and “pandemic pay” which the company says “ensures associates are compensated if they are diagnosed with the virus or quarantined due to of an exhibition”.
The losses make things harder for the retailer’s $3.3 billion in long-term debt and other liabilities. The retailer in the third quarter of 2019 was able to briefly break a cycle of losses, with increases in sales and a positive profit but returned to a Q4 loss. Pushing back its maturities would give the retailer time to orchestrate a turnaround without taking more dramatic action if its debt fell into deeper distress.
Rite Aid has struggled to stabilize its results and retain its market share as it tries to compete with massive rivals CVS and Walgreens – which are getting bigger through acquisitions and partnerships. Through By contrast, Rite Aid is “structurally disadvantaged”, with regional focus and a lack of national scale, Fitch analysts said in October as they downgraded the retailer’s long-term default rating.
Since then, COVID-19 has disrupted and defined the entire retail world, both for discretionary retailers and those who have stayed open. Essential businesses have generally seen sales rise, but additional costs and spending changes have also made it difficult for many to make a profit even when open.
“There are certainly challenges brought about by COVID-19, including the decline in acute prescriptions and the increased costs incurred in keeping our associates and customers safe,” CEO Heyward Donigan said in a statement. “No matter the challenge, we can execute our strategy and deliver day-to-day operational excellence in the face of a pandemic.”