Rite Aid Warns of High Drug Costs in Fiscal 2015, Shares Fall

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Published June 05, 2014

| FOXBusiness

Shares of Rite Aid (RAD) fell close to 10% on Thursday after the pharmacy chain lowered its fiscal 2015 outlook, citing higher-than-expected drug costs related to a delay in lower-priced generic drugs.

The third-largest pharmacy chain behind Walgreen (WAG) and CVS Caremark (CVS) softened its full-year outlook to between 30 cents and 40 cents a share from a previous view of 31 cents to 42 cents.

That’s mostly below average analyst estimates of 39 cents, according to a Thomson Reuters poll.

The pharmacy chain, which kept its sales view the same, attributed the decline to an ongoing delay in realizing price reductions from generic drugs. 

Its shares slid 9.1% to $7.73 in recent trade.

The Camp Hill, Pa.-based retailer also gave disappointing preliminary first-quarter earnings for the quarter ended May 31.

It is expecting to report earnings per share of four cents, trailing the same period last year due to difficult pharmacy trends, including higher drug costs. Analysts on average were calling for EPS of eight cents.

Same-store sales during the 13-week period increased 3.1%, buoyed by higher prescription sales that helped to offset a broader decline in pharmacy sales and flat front-end sales. Total sales for the quarter increased 2.6% to $6.43 billion, matching expectations.

Rite Aid will report actual first-quarter results on June 19.

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