Rite Aid posts narrower 4th-qtr loss but warns annual loss may widen on costs for new programs

Rite Aid predicts its loss may grow in fiscal 2011

NEW YORK — Drugstore chain Rite Aid Corp. said Wednesday it may post larger losses in its current fiscal year as many shoppers remain out of work and it ramps up spending on new programs.

Rite Aid is preparing to roll out a new customer loyalty program called Wellness Plus. The Camp Hill, Pa., company is planning to have pharmacists who can administer flu shots at many stores in time for the next flu season. It is also planning to close 80 more stores this year while larger rivals CVS and Walgreen continue to expand.

Rite Aid forecast a loss of $355 million to $570 million, or 41 cents to 65 cents per share, in fiscal 2011. Revenue was estimated at $25.2 billion to $25.6 billion, down slightly from the past year. According to Thomson Reuters, analysts expected a loss of 36 cents per share and $25.8 billion in revenue.

At stores open at least a year, sales could grow as much as 1 percent or fall as much as 1 percent, the company said.

Rite Aid said its forecasts are based on current trends including a weak economy with high unemployment. It announced plans for the new rewards program in September, saying it would emphasize pharmacy sales. Rite Aid currently offers discounts on prescription drugs and store brand items through its Rx Savings Card.

Shares of Rite Aid fell 19 cents, or 11.2 percent, to close at $1.50 Wednesday.

Rite Aid has closed almost 300 stores over the last two years — including 22 in the fourth quarter — targeting locations where sales were weak or which were close to another Rite Aid. It plans to slow the pace of store closings in fiscal 2011, and would have around 4,700 stores if 80 are closed. CVS and Walgreen each have more than 7,000.

Rite Aid trimmed its debt in fiscal 2010, but it still owes $6.37 billion. It also refinanced some of its debt to improve its financial flexibility.

In the three months that ended Feb. 27, Rite Aid lost $210.6 million, or 24 cents per share, compared with a loss of $2.3 billion, or $2.67 per share, in the prior-year quarter.

A year ago, with its share price plunging, Rite Aid wrote down the value of its assets by $1.81 billion. That included a $1.2 billion write-down on the value of the Brooks Eckerd drugstore chain. The company bought 1,850 Brooks Eckerd stores for $2.36 billion in June 2007, but sales at those stores have remained weak.

Revenue fell 4 percent to $6.46 billion from $6.71 billion due to store closings and the weak economy.

Analysts expected a smaller loss of 19 cents per share and revenue of $6.49 billion.

“It was a difficult quarter with continued weak consumer demand, a weaker cough cold and flu season than last year and continued pressure on pharmacy reimbursement,” said Chairwoman and CEO Mary Sammons. The company said it made smaller profits on sales of new generic drugs and lower reimbursement rates. Sales at stores open at least one year declined 2.4 percent.

Rite Aid lost $515.6 million, or 59 cents per share, in fiscal 2010. That was down from $2.94 billion, or $3.49 per share, in fiscal 2009. Its sales fell 2 percent to $25.67 billion from $26.29 billion. Sales at stores open at least one year slipped 0.9 percent.

Rite Aid also said sales decreased in March due to store closings and a decline in pharmacy revenue. Sales of other items got a boost because Easter is earlier in April this year, which moved up some holiday sales.