April 2, 2009 / 4:25 PM / 9 years ago

UPDATE 3-Rite Aid posts loss, explores refinancing options

* Q4 shr loss $0.14 ex-items vs Wall St. loss view $0.105

* Sees fiscal 2010 sales $26.3 bln-$26.7 bln

* Sees fiscal 2010 shr loss $0.26 -$0.53

* In talks to refinance credit line

* Shares up 5 cents, or 12.8 percent (Adds CEO and analyst comments, byline; updates stock move)

By Aarthi Sivaraman

NEW YORK, April 2 (Reuters) - Rite Aid Corp (RAD.N) posted a bigger-than-expected quarterly loss as it booked a big charge and shoppers curtailed spending, and the No. 3 U.S. drugstore chain said it is exploring refinancing options for its credit line.

The company, which has posted losses for seven straight quarters now, forecast another loss for the current fiscal year on Thursday, as it tries to reduce debt, keep a tight lid on expenses and overhaul its performance.

Rite Aid said its loss widened to $2.29 billion, or $2.67 per share, in the fourth quarter ended Feb. 28 from $952.2 million, or $1.20 per share, a year earlier.

The results include noncash charges to write down the value of goodwill and stores, and a tax valuation allowance.

Excluding those items, Rite Aid lost 14 cents per share, worse than the analysts’ average forecast of a loss of 10.5 cents, according to Reuters Estimates.

“The quarter came in, even with all the adjustments, a little below where we had though they might,” said John Ransom, a Raymond James analyst. “They still burned cash this year. From that standpoint, it was a disappointing year for them.”

Sales fell 1.7 percent to $6.7 billion, as it had fewer stores than a year before. Same-store sales dipped 0.1 percent.

For fiscal 2010, Rite Aid expects sales of $26.3 billion to $26.7 billion, versus analysts’ estimates of $26.6 billion, and a same-store sales rise of 0.5 percent to 2.5 percent.

The company forecast a fiscal-year net loss of 26 to 53 cents per share, while analysts expect a loss of 33 cents.

Its outlook is based on expectations that the recession and job losses will continue to hurt it, even though retail spending may “somewhat” pick up, Chairman and Chief Executive Mary Sammons said on a conference call.

“We will continue to aggressively pursue reducing costs by operating more efficiently and taking unnecessary expense out of the business,” Sammons said. The initiatives are geared toward helping Rite Aid begin reducing its debt, she added.

Rite Aid’s shares, which were above $3 a year ago but have been trading below $1 for months, rose 12.8 percent, or 5 cents, to 44 cents on the New York Stock Exchange amid a broad market advance.

Rite Aid, like larger rivals CVS Caremark Corp (CVS.N) and Walgreen Co WAG.N, has seen shoppers spend cautiously on discretionary items and even skip trips to the doctor as they deal with the credit crunch and mounting job losses.

Sales at Rite Aid stores open at least a year fell 0.7 percent in March. That compares with a 1.5 percent increase at Walgreen, which said it had benefited from an additional weekday in the month this year. [ID:nBw025334a]

Rite Aid has been remodeling its older stores, opening new ones, closing others and cutting costs. Like its rivals, it has also been promoting lower-cost drugs and private-label items.

In its latest cost-cutting effort, Rite Aid said it would close a distribution center in Georgia later this year, a move that affects 297 employees, as it consolidates the activities of its 14 distribution centers. [ID:nBw025168a]

TALKS ON DEBT

Rite Aid, which bought the Brooks and Eckerd chain from Canada’s Jean Coutu (PJCa.TO) in 2007, said it was in talks with bank partners to explore refinancing options for a $1.75 billion credit facility that matures in September 2010 as well as a $145 million term loan.

Both of those facilities were used to finance the Brooks and Eckerd acquisition, a spokeswoman said.

As of March 28, Rite Aid had 4,883 stores, down from 5,049 a year ago. CVS and Walgreen each have more than 6,700 locations.

The company plans to open 20 new stores and relocate 55 others in fiscal 2010.

In March, Rite Aid said it would hold off on its plans for a reverse stock split since the New York Stock Exchange temporarily suspended its minimum share-price listing rule. (Additional reporting by Jessica Wohl; Editing by Gerald E. McCormick and Lisa Von Ahn)

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