Executive Summary

Q3 FY2023 revenue of $6.08B (-2.3% y/y) and adjusted EBITDA of $121.9M (2.0% margin) improved sequentially from Q2 as retail comps strengthened and Elixir profitability increased; GAAP EPS was -$1.23 and adjusted EPS was -$0.14 .
Management said the quarter “beat consensus on top and bottom line,” but lowered FY23 adjusted EBITDA to $410–$440M (from $450–$490M) on pharmacy margin pressure, seasonal markdowns, and higher shrink; adjusted EPS guidance cut to -$2.18 to -$1.78 .
Retail comps remained resilient (pharmacy +9.5%, front-end ex-tobacco +2.7%), with stronger acute scripts (ex-COVID) +8.0% and total same-store scripts +3.6% (ex-COVID); Elixir adjusted EBITDA rose 39% y/y to $40.2M on procurement economics and SG&A reductions .
“Performance acceleration program” launched to fast-track initiatives to improve sales, script volume, margins, and free cash flow; management also highlighted CMS receivable securitization and targeted leverage ~5x by year end FY23 as capital actions continue .

What Went Well and What Went Wrong

What Went Well
- Elixir outperformed: adjusted EBITDA rose to $40.2M (+39% y/y) on improved procurement economics and lower SG&A, partially offsetting client losses .
- Retail comps and script growth: pharmacy comps +9.5%, front-end ex-tobacco +2.7%, total same-store scripts +3.6% (ex-COVID); acute scripts +8.0% (ex-COVID) .
- Management claims beat: “Our third quarter beat consensus on top and bottom line,” aided by Elixir and accelerated retail sales growth; execution focus via a “performance acceleration program” .
What Went Wrong
- Guidance cut: FY23 adjusted EBITDA lowered to $410–$440M (from $450–$490M) and adjusted EPS cut to -$2.18 to -$1.78 on lower pharmacy margins, seasonal markdowns, and higher shrink .
- Retail profitability pressure: Retail Pharmacy adjusted EBITDA fell to $81.7M (1.9% margin) vs $125.9M (2.8%) y/y, driven by reduced COVID services and higher shrink despite SG&A reductions .
- Revenue declined y/y: Consolidated revenue $6.08B vs $6.23B y/y (-$145.5M), reflecting lower COVID vaccines/testing, store closures, and a planned loss of covered lives at Elixir .

Financial Results

Consolidated results (oldest → newest)

Metric	Q1 FY2023	Q2 FY2023	Q3 FY2023
Revenue ($B)	$6.01	$5.90	$6.08
GAAP Diluted EPS ($)	-$2.03	-$6.07	-$1.23
Adjusted EPS ($)	-$0.60	-$0.63	-$0.14
Adjusted EBITDA ($M)	$100.13	$78.55	$121.92
Adjusted EBITDA Margin (%)	1.66%	1.33%	2.00%

Segment breakdown and trends

Segment	Q2 FY2023 Revenue ($M)	Q3 FY2023 Revenue ($M)	Q3 FY2022 Revenue ($M)	Q2 FY2023 Adj. EBITDA ($M)	Q3 FY2023 Adj. EBITDA ($M)	Q3 FY2022 Adj. EBITDA ($M)
Retail Pharmacy	4,231.8	4,412.2	4,432.5	31.5	81.7	125.9
Pharmacy Services (Elixir)	1,727.2	1,726.9	1,858.8	47.1	40.2	28.9

KPIs (Retail)

KPI	Q1 FY2023	Q2 FY2023	Q3 FY2023
Pharmacy same-store sales	+6.6%	+8.0%	+9.5%
Front-end same-store sales	-0.5%	-0.3%	+2.2%
Front-end ex-tobacco	0.0%	0.2%	+2.7%
Total same-store scripts (ex-COVID)	+3.7% (non-COVID)	+2.1%	+3.6%
Acute scripts (ex-COVID)	+11.9%	+5.3%	+8.0%
Maintenance scripts (ex-COVID)	+1.4%	+1.2%	+2.1%

Notes:

Consolidated revenue decline y/y driven by reduced COVID services, store closures, and planned Elixir membership loss; partially offset by front-end strength and non-COVID scripts .
Elixir revenue declined y/y on planned membership decrease and a client loss but improved profitability via procurement and SG&A reductions .

Guidance Changes

Metric	Period	Previous Guidance (Q2 FY2023)	Current Guidance (Q3 FY2023)	Change
Total Revenue	FY2023	$23.6B–$24.0B	$23.7B–$24.0B	Narrowed high-end; slight raise to low-end
Adjusted EBITDA	FY2023	$450M–$490M	$410M–$440M	Lowered
Adjusted EPS (Diluted)	FY2023	-$1.52 to -$0.97	-$2.18 to -$1.78	Lowered
Retail Pharmacy Adj. EBITDA	FY2023	$305M–$335M	$265M–$285M	Lowered
Pharmacy Services (Elixir) Adj. EBITDA	FY2023	$145M–$155M	$145M–$155M	Maintained
Capital Expenditures	FY2023	~$225M	~$225M	Maintained
Free Cash Flow	FY2023	Expect to generate positive FCF	Expect to generate positive FCF	Maintained

Rationale: Lower pharmacy margins, seasonal markdowns, and higher shrink; cautious consumer demand also cited .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q1, Q2)	Current Period (Q3)	Trend
Elixir profitability	Q1: EBITDA down on client loss/MLR; pipeline building . Q2: improved network performance, higher rebates, SG&A cuts .	EBITDA +39% y/y to $40.2M on procurement economics and SG&A reductions .	Improving
Retail comps/scripts	Q1: pharmacy +6.6%, acute +11.9% . Q2: pharmacy +8.0%, scripts +2.1% .	Pharmacy +9.5%, front-end ex-tobacco +2.7%, scripts +3.6% (ex-COVID), acute +8.0% .	Improving
Pharmacy margin/shrink	Q2: supply chain/front-end pressure .	Guidance cut on lower pharmacy margins; higher shrink; seasonal markdowns .	Deteriorating
SG&A efficiency	Q1: -$40M Retail SG&A; target F23 savings; 87 closures . Q2: -$45M SG&A; on track to exceed $170M .	Lower payroll, occupancy and other costs; ~ $190M SG&A savings target for FY23 .	Improving
Digital/loyalty	Q1: digital rev +109%; new loyalty rollout . Q2: digital strength; loyalty program .	+300K new digital accounts; +500K new loyalty members in Q3 .	Improving
Footprint optimization	Q1: closures ahead of schedule . Q2: continued closures .	Store closures benefit SG&A; total stores 2,324 at Q3-end .	Ongoing
Capital/liquidity	Q1: tender offer; no debt due until 2025 . Q2: similar .	CMS receivable securitization (~$170M piece completed; second expected in Q4); leverage ~5x by year end FY23; sale-leaseback $9.9M; no maturities until 2025 .	Mixed (liquidity actions positive)

Management Commentary

“Our third quarter beat consensus on top and bottom line, and we’re pleased with our results at Elixir and our accelerated sales growth at retail. However, based on recent trends, we are lowering our full year guidance due to headwinds including pharmacy margin, seasonal markdowns and higher shrink. In addition, we are kicking off a performance acceleration program…” — Heyward Donigan, CEO .
Guidance rationale: “Adjusted EBITDA is expected to be between $410 million and $440 million versus prior guidance of between $450 million and $490 million, due to expectations of lower pharmacy margins, cautious consumer demand and the related impact on seasonal markdowns and continued shrink expense” .
Capital and cash actions: completed securitization of ~ $170M of 2022 CMS receivable; second piece expected in Q4; leverage ratio targeted in the ~5x range by year end; sale-leaseback proceeds of $9.9M; “No debt due until 2025” .

Q&A Highlights

Full Q3 FY2023 earnings call transcript was not available in the document set; only the earnings press release and supplemental slides were provided. As a result, we could not extract Q&A themes or clarifications beyond management’s prepared commentary in the press materials .

Estimates Context

S&P Global (Capital IQ) consensus data were unavailable for RADCQ/RAD in our estimates tool at the time of analysis; therefore, numeric comparisons to Wall Street consensus could not be shown. Management stated the quarter “beat consensus on top and bottom line,” but we cannot independently verify magnitudes without S&P Global data .

Key Takeaways for Investors

Sequential improvement: Adjusted EBITDA and margins improved q/q (to $121.9M and 2.0%) on stronger retail comps and Elixir profitability, partially offsetting y/y revenue declines from lower COVID services and store closures .
Guidance reset: FY23 adjusted EBITDA and EPS guidance were cut on pharmacy margins, markdowns, and shrink—key watch items into year-end and for FY24 modeling .
Elixir momentum: Despite planned membership declines, Elixir’s profitability improved materially y/y on procurement and SG&A actions; maintaining FY23 Elixir EBITDA guidance suggests some visibility .
Retail profitability pressure: Retail Pharmacy adjusted EBITDA remains below prior-year levels despite SG&A efficiencies; recovery likely hinges on margin stabilization and continued script growth .
Execution catalysts: “Performance acceleration program,” digital/loyalty engagement (300K new digital accounts; 500K new loyalty members), and adherence initiatives may support traffic and script volume ahead of seasonal periods .
Balance sheet actions: CMS receivable securitization and no maturities until 2025 provide runway; leverage targeted ~5x by FY23 year end, but trajectory will depend on EBITDA delivery and working capital .
Trading setup: Near-term stock drivers include signs of pharmacy margin stabilization, shrink mitigation, holiday markdown discipline, and sustaining Elixir profitability improvements; a further guide update at year-end could be a catalyst .

Appendix: Additional Detail

Consolidated y/y context for Q3 FY2023:

Revenue $6.083B vs $6.229B y/y; net loss per share -$1.23 vs -$0.67 y/y; adjusted EPS -$0.14 vs $0.15 y/y; adjusted EBITDA $121.9M (2.00%) vs $154.8M (2.49%) y/y .
Retail Pharmacy revenue $4,412.2M (-0.5% y/y), adjusted EBITDA $81.7M (1.85% margin) vs $125.9M (2.84%) y/y; pressure from reduced COVID services and higher shrink, partially offset by script volume growth and SG&A reductions .
Pharmacy Services revenue $1,726.9M (-7.1% y/y), adjusted EBITDA $40.2M (2.33% margin) vs $28.9M (1.55%) y/y; benefit from procurement economics and SG&A reductions .

All data and quotes sourced from Rite Aid’s Q3 FY2023 8-K earnings press release and supplemental materials, and Q1–Q2 FY2023 earnings 8-Ks .

RITE AID CORP (RADCQ)·Q3 2023 Earnings Summary