Rite Aid rebounds, adds new board members
The nation's third largest drug store chain eked out a 1 percent same store sales increase in the second quarter and named three new director nominees, who will stand for election at the 2018 Annual Meeting of Stockholders, as the company looks to appease shareholders who pressed the company to abort a merger with Albertsons.
The drugstore chain's revenue hit $5.42 billion, slightly above the $5.36 billion reported in last years second quarter results. Same-store sales increased 1 percent from the same quarter last year, including a 1.6 percent increase in pharmacy sales and a 0.1 percent decrease in front-end sales. Rite Aid's adjusted earnings before interest, taxes, depreciation, and amortization were $148.6 million, compared with $136.9 million from the previous year.
The company reported a net loss of $352.3 million, or 33 cents per share. The company said it incurred $282.6 million in intangible asset impairment charges related to its pharmacy services segment. When stripping out such one-time events, the company reported a loss $7.9 million or 1 cent per share.
“During the quarter, we have been hard at work accelerating our standalone strategy to capitalize on key opportunities to grow our business,” said Rite Aid Chairman and Chief Executive Officer John Standley. ”These efforts helped us drive significant improvement in front-end and pharmacy comparable stores sales and exceed our plans for script count growth. With our trusted brand of health and wellness, highly popular customer loyalty program, innovative Wellness format and expanding offering of health and wellness services, we have a strong foundation for growth.”
The company also named three new board member nominees in the hopes of appeasing shareholders who opposed the Albertsons merger. The three new independent director nominees – Robert E. Knowling, Jr., Louis P. Miramontes and Arun Nayar – will stand for election at the 2018 Annual Meeting of Stockholders, which is scheduled to be held at 8:30 a.m. ET on Oct. 30, at the Marriott Marquis Hotel, 1535 Broadway, New York, NY. In addition to the three new independent nominees, Joseph B. Anderson, Jr., Bruce G. Bodaken, Kevin E. Lofton, Michael N. Regan, John T. Standley and Marcy Syms will stand for re-election to the Rite Aid Board.
The company also announced that it has decided to separate the positions of Chairman and Chief Executive Officer. Bruce G. Bodaken will hold the position of Chairman, effective at the 2018 Annual Meeting of Stockholders.
“These changes will significantly strengthen and enhance the Board’s governance oversight and reflect our commitment to aligning Rite Aid’s interests with those of stockholders,” said Mr. Bodaken. “Since terminating the transaction with Albertsons, we have engaged directly with many of our largest stockholders. Based on the valuable insight and input we have received, we are accelerating our effort to refresh the Board. We are pleased to welcome Bob, Lou and Arun, and believe their fresh perspectives will be significant assets as we continue to oversee the development and implementation of our strategy to best position Rite Aid to create long-term value for stockholders.”
Rite Aid terminated its planned merger with grocery chain Albertsons in August amid opposition from investors. Those who opposed the merger argued that such a deal would have provided Albertsons’ privat equity owner, Cerberus Capital Management, a means to take the company public, with no benefit to Rite Aid shareholders. Rite Aid had said it hoped to reinvent itself with the help of Albertsons, while the grocery chain said it hoped to use the merger to eventually go public and raise cash to revamp its store portfolio.
With the deal now off, both retailers face competitive challenges as standalone companies, but none more so than Rite Aid. The drug chain is competing in a sector that is challenged by Amazon entering the online pharmacy business and other evolving dynamics in health care and retail. And the top two drug chains, CVS and Walgreens, are both heavily investing in health care and leading the sector.
In the second quarter, the company remodeled 33 stores, bringing the total number of wellness stores chainwide to 1,726. During the second quarter, the company closed 8 stores and opened 1 store, resulting in a total store count of 2,526 at the end of the second quarter.