December 18, 2008 / 6:05 PM / 9 years ago

UPDATE 3-Rite Aid loss widens, forecast cut; shares fall

* Q3 loss widens to 30 cents per share

* Sales slip to $6.47 billion

* Expects wider FY net loss, weaker FY same-store sales

* Shares fall as much as 17.6 percent (Adds analyst comments, updates stock activity, adds byline)

By Jessica Wohl

CHICAGO, Dec 18 (Reuters) - Rite Aid Corp RAD.N posted its sixth straight quarterly loss as sales fell and forecast a bigger loss this year as shoppers cut back in a recession, sending its depressed shares down nearly 18 percent.

The No. 3 U.S. drugstore has been remodeling older stores, opening new ones, closing others and cutting costs.

Now that it has integrated the Brooks and Eckerd chains it bought from Jean Coutu PJCa.TO in 2007, Rite Aid said it would take more steps such as paring inventory and promoting its drug savings plan and private label items to appeal to cash-strapped shoppers.

Rite Aid, along with larger rivals CVS Caremark Corp CVS.N and Walgreen Co WAG.N, has seen shoppers cut back with a credit crunch and mounting job losses.

Sales at stores open at least a year, or same-store sales, rose 1.4 percent in the third quarter, but are up just 0.4 percent so far in December, President John Standley said during a conference call. Same-store sales of general merchandise are down, while same-store pharmacy sales are up, he said.

Rite Aid lost $243.1 million, or 30 cents per share, in its fiscal third quarter ended Nov. 29, weighed down by charges. A year ago, it lost $84.8 million, or 12 cents a share.

Sales fell to $6.47 billion from $6.5 billion due in part to store closures.

“Cost structure and working capital management improvements need to be more pronounced for the company to address its liquidity concerns, but the early progress under new management is encouraging,” said Banc of America analyst Robert Willoughby, who has a “neutral” rating on the shares.

The company recently brought in three executives from grocer Pathmark Stores Inc, including Standley, who had previously worked at Rite Aid, as it works on improvements.

Still, it does not have the diversity of CVS or Walgreen, which each operate businesses such as in-store clinics and pharmacy benefit management services. Rite Aid also has fewer stores, with 4,914 at the end of the third quarter, while CVS and Walgreen each have more than 6,600.

Rite Aid said adjusted EBITDA, or adjusted earnings before certain items, rose 8.5 percent to $252 million. Analysts on average had expected about $205 million, according to Reuters Estimates.

Analysts have low expectations for Rite Aid versus its peers. Two rate Rite Aid “buy” and “outperform,” while Walgreen has seven such ratings and CVS has 17, according to Reuters Estimates.

EXPECTATIONS LOWERED AGAIN

Rite Aid now expects a fiscal 2009 net loss of $593 million to $773 million, or 74 cents to 95 cents per share, versus a lowered forecast for a loss of $445 million to $535 million, or 56 cents to 67 cents per share, which it gave in September. Rite Aid’s current fiscal year ends on Feb. 28.

The company still expects fiscal 2009 sales of $26 billion to $26.5 billion, though same-store sales will be weaker than previously expected. It expects same-store sales to rise 0.5 percent to 1.5 percent, down from a prior forecast for 1.5 percent to 3 percent.

Rite Aid said it still expects fiscal 2009 adjusted EBITDA of $950 million to $1.025 billion.

Shares of Rite Aid were down 6 cents at 45 cents after falling as low as 42 cents. Earlier this month shareholders approved a plan for a reverse stock split to boost the share price and keep the company’s listing on the New York Stock Exchange. A year ago, Rite Aid traded at $4.13 per share. (Editing by Steve Orlofsky and John Wallace and Matthew Lewis)

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