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RA

RITE AID CORP (RADCQ)·Q1 2024 Earnings Summary

Executive Summary

  • Fiscal Q1 2024 revenue was $5.65B with GAAP EPS of $(5.56) and Adjusted EBITDA of $91.7M; retail script growth and solid pharmacy margins offset front-end weakness, while Elixir was pressured by a higher medical loss ratio and a goodwill impairment tied to exiting Individual Part D in January 2024 .
  • Management cut FY2024 total Adjusted EBITDA guidance by $10M to $330–$360M and reduced capex to ~$175M; Retail Pharmacy EBITDA was maintained, while Pharmacy Services EBITDA was lowered due to higher drug costs/MLR at Elixir Insurance .
  • Guidance for FY2024 total revenues was raised to $22.6–$23.0B (from $21.7–$22.1B), driven by higher expected Pharmacy Services revenues, but GAAP net loss widened to $(650)–$(680)M; Adjusted EPS loss range improved slightly to $(4.78)–$(4.29) .
  • Narrative catalysts: focus on adherence, central fill expansion, and script retention; front-end weakness from perishable consumables transition and shrink; Elixir mix shift and Part D exit weigh on near-term profitability but procurement economics remain a tailwind .

What Went Well and What Went Wrong

  • What Went Well
    • Strong pharmacy momentum: “strong script growth, solid pharmacy margins” with same-store pharmacy sales +13.3% and scripts +7.4% (ex-COVID) in Q1 .
    • Execution on turnaround: “early progress with our turnaround program” and initiatives (abandoned script reduction pilot, script file program exceeded plan; central fill expansion) .
    • Procurement economics tailwind: Elixir’s margins benefitted sequentially from procurement improvements, although partially offset by MLR pressure .
  • What Went Wrong
    • Front-end weakness: same-store front-end sales declined 4.4%, with perishable consumables vendor transition cited as a drag in Q1 .
    • Elixir headwinds: higher-than-expected medical loss ratio and exit from Individual Part D drove a $151.5M goodwill impairment and lower segment EBITDA guidance .
    • FY2024 profitability cut: Total Adjusted EBITDA lowered by $10M and GAAP net loss widened to $(650)–$(680)M on higher drug costs/MLR at Elixir .

Financial Results

MetricQ3 2023Q4 2023Q1 2024
Revenue ($USD Billions)$6.08 $6.09 $5.65
GAAP EPS ($USD)$(1.23) $(4.39) $(5.56)
Adjusted EPS ($USD)$(0.14) $(1.24) $(0.73)
Adjusted EBITDA ($USD Millions)$121.9 $128.6 $91.7
Adjusted EBITDA Margin (%)2.00% 2.11% 1.62%

Segment breakdown:

Segment MetricQ3 2023Q4 2023Q1 2024
Retail Pharmacy Revenue ($USD Billions)$4.41 $4.80 $4.49
Retail Pharmacy Adjusted EBITDA ($USD Millions)$81.7 $101.2 $70.0
Pharmacy Services Revenue ($USD Billions)$1.73 $1.34 $1.20
Pharmacy Services Adjusted EBITDA ($USD Millions)$40.2 $27.4 $21.7

Key KPIs:

KPIQ3 2023Q4 2023Q1 2024
Same-Store Pharmacy Sales Growth (%)+9.5% +11.4% +13.3%
Same-Store Front-End Sales Growth (%)+2.2% +2.3% −4.4%
Same-Store Prescriptions Growth (% ex-COVID)+3.6% +9.7% +7.4%
Script Count Growth (30-day eqv.) (%)+4.4% +5.2% +4.7%
Prescription Sales % of Drugstore Sales72.0% 71.5% 73.9%
Store Count (end of period)2,324 2,309 2,284

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Total RevenuesFY2024$21.7–$22.1B $22.6–$23.0B Raised
Retail Pharmacy Segment RevenuesFY2024$17.8–$18.1B $18.0–$18.3B Raised
Pharmacy Services Segment RevenuesFY2024$3.9–$4.0B $4.6–$4.7B Raised
GAAP Net LossFY2024$(439)–$(466)M $(650)–$(680)M Lowered
Total Adjusted EBITDAFY2024$340–$370M $330–$360M Lowered
Retail Pharmacy Adjusted EBITDAFY2024$240–$260M $240–$260M Maintained
Pharmacy Services Adjusted EBITDAFY2024$100–$110M $90–$100M Lowered
Adjusted Net Loss per ShareFY2024$(4.93)–$(4.44) $(4.78)–$(4.29) Improved (less negative)
Capital ExpendituresFY2024~$225M ~$175M Lowered

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 & Q4)Current Period (Q1 2024)Trend
Pharmacy script growth & adherenceQ3: adherence initiatives (courtesy refills, digital, loyalty, MTM) and script growth; Q4: same-store prescriptions +9.7% and performance acceleration model “Strong script growth, solid pharmacy margins”; same-store pharmacy +13.3%, scripts +7.4% (ex-COVID); abandoned script pilot rolling to all stores; script file program exceeded plan Improving
Front-end sales executionQ3/Q4: +2.2%/+2.3% front-end comps Front-end comps −4.4%; vendor transition for perishables to alleviate pressures going forward Deteriorated in Q1
Elixir (membership mix, MLR, procurement)Q3: EBITDA +39% YoY; procurement economics improved; planned membership decline Higher MLR at Elixir Insurance; goodwill impairment tied to exit of Individual Part D; procurement economics improvements continue Mixed (MLR pressure; structural reset)
Cost control & capexQ3: SG&A savings program; leverage targeted lower Targeted SG&A and capex reductions; capex cut to ~$175M Increasing focus
Technology & central fillQ3/Q4: workflow upgrades, central fill expansion plans Continuing central fill expansion to free pharmacist time for clinical services Ongoing
Liquidity & leverageQ4: leverage ratio 6.49; 2025 notes tender reduced to $320M Liquidity ~$1.15B at quarter-end; revolver usage increased Q/Q Stable liquidity; higher gross debt

Management Commentary

  • “Our first quarter results were driven by strong script growth, solid pharmacy margins and early progress with our turnaround program… we are making targeted reductions to SG&A and capital expenditures over the remainder of the year.” — Interim CEO Elizabeth “Busy” Burr .
  • “Our fourth quarter results were at the higher end of our guidance and above consensus, driven by encouraging results in retail pharmacy and year over year improvement for the quarter at Elixir.” — Interim CEO Elizabeth “Busy” Burr .
  • Retail execution focus: “Reducing abandoned scripts with pilot program… rollout will complete to all stores by end of July; Script file program exceeded the Q1 plan.” .

Q&A Highlights

  • The earnings call transcript for Q1 2024 was not available in our document catalog; therefore, detailed Q&A highlights and any live guidance clarifications from the call cannot be provided .

Estimates Context

  • S&P Global/Capital IQ consensus estimates for RADCQ were unavailable due to missing CIQ mapping; as a result, we cannot compare Q1 results versus Wall Street consensus. Management noted Q4 results were “above consensus,” but did not provide Q1 consensus comparisons in the press release .
  • Values retrieved from S&P Global were unavailable for this ticker.

Key Takeaways for Investors

  • Pharmacy momentum is intact (double-digit pharmacy comps, higher prescription mix, stronger margins) and remains the core lever to offset front-end weakness; expect continued focus on adherence and central fill expansion to sustain script growth .
  • Near-term profitability headwinds are concentrated in Elixir (higher drug costs/MLR) and the structural exit from Individual Part D (goodwill impairment); FY2024 Pharmacy Services EBITDA guidance was cut to $90–$100M .
  • FY2024 revenue outlook was raised materially (to $22.6–$23.0B), but GAAP net loss widened and total Adjusted EBITDA was trimmed to $330–$360M; Retail Pharmacy EBITDA guidance was maintained, signaling confidence in retail pharmacy earnings power despite front-end softness .
  • Capex reduced to ~$175M and SG&A targeted for reductions, improving cash discipline as the company navigates macro and segment-specific headwinds .
  • Front-end recovery is a watch item; vendor transitions and pricing/shelf-space optimization should help, but shrink and category mix remain risks to gross profit .
  • Liquidity remains solid (~$1.15B); however, gross debt increased Q/Q and leverage is elevated—balance sheet risk necessitates execution on turnaround and cost actions .
  • Without consensus estimates, trading setups hinge on guidance trajectory and operational updates; upside catalysts include faster adherence gains, front-end stabilization, and additional procurement wins, while downside risks center on Elixir MLR and legal/regulatory uncertainties noted in cautionary statements .