December 17, 2009 / 3:55 PM / 9 years ago

UPDATE 3-Rite Aid loss narrows despite sales drop, shares up

* Q3 shr loss 10 cents vs Street view loss 18 cents

* Sales off 1.8 pct to $6.35 bln, same-store off 0.5 pct

* Narrows FY loss view, sees FY sales of $25.6-$25.9 bln

* Shares up nearly 13 pct (Adds company comments, bylines, updates share moves)

By Jessica Wohl and Phil Wahba

CHICAGO/NEW YORK, Dec 17 (Reuters) - Rite Aid Corp (RAD.N) posted a smaller-than-expected quarterly loss on Thursday, helped by cost cuts, and narrowed the range of the loss it expects to post this year, sending its shares up 12.8 percent.

Rite Aid operates most of its stores on the East and West U.S. coasts and trails Walgreen Co WAG.N and CVS Caremark Corp (CVS.N) in sales, number of locations and market share.

It has refinanced debt, trimmed expenses and taken other steps to improve its position, but has yet to show a major turnaround as shoppers cut back on discretionary purchases.

While the latest loss was much narrower than analysts had anticipated, Rite Aid’s streak of losses remains a concern.

“Their loss is far better than what the expectations were, but then again, we’re seeing that this is the 10th loss in a row. They’ve lost now over $4.3 billion over the past 10 quarters,” said Toon van Beeck, senior industry analyst at IBISWorld Inc.

The company’s net loss of $83.9 million, or 10 cents per share, in the fiscal third quarter ended on Nov. 28, was narrower than the loss of $243.1 million, or 30 cents per share, a year earlier. Analysts expected a loss of 18 cents a share according to Thomson Reuters I/B/E/S.

The chain introduced a loyalty program in four markets in mid-October and plans to expand it to the rest of its stores next year. It is also posting signs featuring deals and selling more private label goods to appeal to cost-conscious shoppers.

Rite Aid’s quarterly sales fell 1.8 percent to $6.35 billion, due in part to closing some stores.

Sales at stores open at least a year, or same-store-sales, fell 0.5 percent. Pharmacy same-store sales rose 0.4 percent, while general merchandise same-store sales fell 2.5 percent.

Rite Aid refinanced its 2010 debt maturities in October, leaving it with no major debt maturities until September 2012. It has also raised its liquidity, allowing it to work on plans such as improving the look of existing stores.

Selling, general and administrative expenses fell 6.2 percent from a year earlier.

The company now has $922 million in available liquidity, up from $903 million at the end of the third quarter, Chief Financial Officer Frank Vitrano said during a conference call. Chairman and Chief Executive Mary Sammons said she expects liquidity to remain strong for the rest of the fiscal year.

For the full fiscal year, Rite Aid expects sales of $25.6 billion to $25.9 billion, with same-store sales in a range of down 1 percent to up 0.5 percent.

Rite Aid now expects to report a fiscal year loss of 50 cents to 66 cents a share, compared with the loss of 48 cents to 74 cents a share it forecast in September. Analysts expect a loss of 57 cents per share.

Still, van Beeck said he remained concerned with Rite Aid’s interest expense, at about 2.1 percent of revenue. That is a far higher percentage than Walgreen or CVS, which are each under 0.7 percent, he said.

Also, Rite Aid has struggled to boost sales at the Brooks and Eckerd stores it bought from Canada’s Jean Coutu PJCa.TO in 2007. The acquisition, which saddled Rite Aid with debt, came just before the recession hit and shoppers cut back.

Shares rose 17 cents, or 12.8 percent, to $1.50.

Reporting by Jessica Wohl in Chicago and Phil Wahba in New York, editing by Dave Zimmerman

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