Rite Aid Store Transfers To Walgreens Impacts Q3 Results

Rite Aid’s third quarter was impacted by the continuing sale and transfer of stores and related assets under the acquisition deal with Walgreens Boots.

In the third quarter ended December 2, Rite Aid Corp. recorded a company net loss from continuing operations of $18.2 million, or two cents per diluted share, versus net income from continuing operations of $23.6 million, or two cents per diluted share, in the year-earlier quarter.

Adjusted net income from continuing operations came in at $1.6 million, or zero cents per diluted share, versus $26.8 million, or three cents per diluted share, in the quarter a year before. Rite Aid adjusted net income for continuing operations beat a Thomson Reuter’s analyst average estimate by two cents per diluted share although its revenues fell well short of Wall Street expectations.

Company net income, including that from discontinued operations, was $81 million, or eight cents per diluted share, versus $15 million, or one cent per diluted share, in the year-prior period.

Comparable store sales from continuing operations slipped 2.5% in the quarter versus the period in the year previous, with the figure based on a 3.5% decrease in pharmacy sales and a 0.5% decrease in front-end sales, which includes general merchandise such as home goods. In the quarter, Rite Aid posted revenues of $5.35 billion versus $5.67 billion in the period a year previous.

Rite Aid recently completed the pilot closing under an amended and restated asset purchase agreement with Walgreens Boots Alliance, which resulted in the transfer of 97 Rite Aid stores and related assets to WBA during the third quarter. Under the agreement, WBA will purchase a total of 1,932 stores, three distribution centers and related inventory from Rite Aid for an a cash purchase price of $4.38 billion. Rite Aid stated that it and WBA expect to continue transferring store ownership in phases over the coming months. The company maintained that it had classified the assets and liabilities to be sold to WBA as held for sale, with the corresponding operating results and cash flows of those stores identified as discontinued operations in its financial statements.

“The third quarter was a busy time for our team in preparing for and beginning the transfer of stores and related assets to Walgreens Boots Alliance,” said John Standley, Rite Aid chairman and CEO. “To date, we have transferred 357 stores and have received approximately $715 million in proceeds, which we have used to pay down debt. Looking forward, in addition to completing the transfer process, we will continue to focus on our most significant business-building opportunities as we work together to deliver a great experience to our customers and patients.”