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Rite Aid third quarter loss nearly triples on store closures

| Thursday, Dec. 18, 2008

Drugstore operator Rite Aid Corp. said Thursday its loss nearly tripled in its third quarter because of costs to close stores and continuing struggles for its Brooks Eckerd pharmacies.

The grim economy and other issues also prompted the company to cut its expectations for next year.

In the quarter ended Nov. 29, the Camp Hill, Pa., company reported a loss of $248.7 million, or 30 cents per share, excluding stock dividends and accretion, compared with year-ago losses of $93 million, or 12 cents per share. Without one-time charges, Rite Aid says its loss totaled $130.1 million, or 15 cents per share.

Revenue fell less than 1 percent, to $6.47 billion from $6.5 billion.

Thomson Reuters says analysts expected a loss of 17 cents per share on $6.46 billion in revenue. Their estimates typically exclude one-time items.

The company has closed 229 weak stores over the past year, including 29 store closures in the third quarter. Rite Aid opened 13 stores, moved 23 and remodeled 11, giving it a total of 4,914 locations at the end of the quarter.

Rite Aid warned it now expects a larger fiscal 2009 loss and weaker same-store sales, pointing to recent sales trends, the recession and the store closures.

The company forecast a fiscal 2009 loss of $593 million to $773 million, or 74 cents to 95 cents per share -- more than its prior estimate for a loss of $445 million to $535 million, or 56 cents to 67 cents per share. Rite Aid maintained its revenue forecast of $26 billion and $26.5 billion.

Analysts currently expect a loss of 69 cents per share and $26.41 billion in revenue for the year.

This is the second time Rite Aid has lowered its annual estimates. At the end of the second quarter it said it was taking longer than expected to improve pharmacy results at Brooks Eckerd.

Rite Aid said its same-store sales will rise only 0.5 percent to 1.5 percent in fiscal 2009, instead of 1.5 percent to 3 percent as previously forecast. Same-store sales are revenue from stores open at least one year, and they are considered a key measurement of retailer health.

Rite Aid's total same-store sales improved 1.4 percent during the quarter, but they fell 2.6 percent at Brooks Eckerd pharmacies. That is a smaller decline than in the second quarter, and non-pharmacy sales for Brooks Eckerd improved from the second quarter. Both pharmacy and non-pharmacy sales at older Rite Aid stores improved.

Rite Aid President and Chief Operating Officer John Standley said same-store sales at Brooks Eckerd pharmacies have improved slightly in December compared to last year, and results at core Rite Aid stores are stronger. He said same-pharmacy sales were up 3.5 percent through Dec. 17.

However, non-pharmacy sales are down 5 percent in that period due to the recession, which is causing weak sales of seasonal items. In total, Rite Aid's December same-store sales are up 0.4 percent. The four-week period ends Dec. 27.

The company bought 1,850 Brooks Eckerd stores in June 2007, and Rite Aid said it is finished integrating those stores.

Rite Aid shares dipped 6 cents, or 12 percent, to 45 cents in morning trading. Earlier this month, the company approved a reverse stock split in order to maintain its listing on the New York Stock Exchange.

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