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RITE AID CORP (RADCQ)·Q4 2023 Earnings Summary

Executive Summary

  • Q4 FY2023 revenue was $6.09B, up slightly year-over-year; Adjusted EBITDA was $128.6M (2.1% margin), at the higher end of guidance and characterized by management as “above consensus.” Adjusted EPS was $(1.24), and GAAP EPS was $(4.39) .
  • EPS missed Street expectations (publicly reported consensus $(0.77) vs. actual $(1.24)), while Adjusted EBITDA beat (publicly reported expectation ~$$101M vs. actual $128.6M) .
  • FY2024 guidance initiated: revenue $21.7–$22.1B, Adjusted EBITDA $340–$370M, Adjusted EPS $(4.93)–$(4.44); management expects second-half weighted EBITDA given timing of performance acceleration initiatives .
  • Narrative catalysts: retail pharmacy script growth (+5.2% same-store scripts; +9.7% ex-COVID), improved Elixir margin mix, and a $165M notes tender; weighed by reimbursement pressure, cycling COVID benefits, wage inflation, and shrink concerns .

What Went Well and What Went Wrong

What Went Well

  • Retail pharmacy momentum: same-store sales +8.9% (pharmacy +11.4%; front-end +2.3; +2.8 ex-tobacco); same-store scripts +5.2% (+9.7% ex-COVID), reflecting both maintenance (+8.2%) and acute (+14.9%) growth .
  • Elixir improvement: Q4 segment Adjusted EBITDA rose to $27.4M (2.0% margin) on better procurement economics, favorable member mix, and SG&A reductions .
  • Turnaround actions: “performance acceleration program” targeting generic purchasing efficiencies, indirect spend reductions, and higher Elixir margins; “at the higher end of guidance and above consensus,” per Interim CEO Elizabeth “Busy” Burr .

What Went Wrong

  • GAAP loss remains large: Q4 net loss of $241.3M; impairment and restructuring charges continue, with GAAP EPS $(4.39) .
  • Pharmacy margin and shrink headwinds persisted across the year, with management noting reimbursement pressure and front-end markdown/shrink challenges in prior quarter trends .
  • Elixir membership declined (loss of commercial clients and Individual Part D lives), pressuring segment revenue despite margin improvements .

Financial Results

MetricQ2 2023Q3 2023Q4 2023
Revenue ($USD Billions)$5.901 $6.083 $6.093
Net Loss ($USD Millions)$(331.3) $(67.1) $(241.3)
GAAP Diluted EPS ($USD)$(6.07) $(1.23) $(4.39)
Adjusted EBITDA ($USD Millions)$78.5 $121.9 $128.6
Adjusted Net Loss per Diluted Share ($USD)$(0.63) $(0.14) $(1.24)

Segment breakdown

Segment MetricQ2 2023Q3 2023Q4 2023
Retail Pharmacy Revenue ($USD Billions)$4.232 $4.412 $4.796
Retail Pharmacy Adjusted EBITDA ($USD Millions)$31.5 $81.7 $101.2
Retail Pharmacy Adjusted EBITDA Margin (%)0.74% 1.85% 2.11%
Pharmacy Services Revenue ($USD Billions)$1.727 $1.727 $1.342
Pharmacy Services Adjusted EBITDA ($USD Millions)$47.1 $40.2 $27.4
Pharmacy Services Adjusted EBITDA Margin (%)2.72% 2.33% 2.04%

KPIs

KPIQ2 2023Q3 2023Q4 2023
Same-Store Sales (Pharmacy, %)+8.0% +9.5% +11.4%
Same-Store Sales (Front-End, %)−0.3% +2.2% +2.3%
Same-Store Sales (Front-End ex-tobacco, %)+0.2% +2.7% +2.8%
Script Count Growth (30-day adj., %)+3.1% +4.4% +5.2%
Same-Store Prescriptions ex-COVID (%)+2.1% +3.6% +9.7%
Maintenance Scripts Growth (%)+1.2% +2.1% +8.2%
Acute Scripts Growth (%)+5.3% +8.0% +14.9%
Prescription Sales Mix (%)70.7% 72.0% 71.5%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Total Revenues ($USD Billions)FY2024N/A$21.7–$22.1 Initiated
Retail Pharmacy Segment Revenue ($USD Billions)FY2024N/A$17.8–$18.1 Initiated
Pharmacy Services Segment Revenue ($USD Billions)FY2024N/A$3.9–$4.0 Initiated
Net Loss ($USD Millions)FY2024N/A$(466)–$(439) Initiated
Adjusted EBITDA ($USD Millions)FY2024N/A$340–$370; Retail $240–$260; Elixir $100–$110 Initiated
Adjusted Net Loss per Diluted Share ($USD)FY2024N/A$(4.93)–$(4.44) Initiated
Capital Expenditures ($USD Millions)FY2024N/A~$225 Initiated
Total Revenues ($USD Billions)FY2023$23.6–$24.0 $23.7–$24.0 Maintained/Raised low end
Adjusted EBITDA ($USD Millions)FY2023$450–$490 $410–$440 Lowered
Adjusted Net Loss per Diluted Share ($USD)FY2023$(1.52)–$(0.97) $(2.18)–$(1.78) Lowered

Earnings Call Themes & Trends

TopicPrevious Mentions (Q-2 and Q-1)Current Period (Q4)Trend
Reimbursement rate pressureIndicated sustained margin pressure in retail pharmacy Anticipated FY2024 headwind from reimbursement declines Persistent headwind
COVID normalizationRevenue declines from vaccines/testing “Cycling COVID benefits” headwind Ongoing normalization
SG&A/cost controlsStore closures and SG&A reductions “Performance acceleration program,” indirect spend reductions; second-half weighted EBITDA Intensifying execution
Elixir margin/mixImproved procurement economics; planned client losses Favorable membership mix; improved MLR and procurement economics Margin improvement despite lower lives
ShrinkNoted higher shrink expense Wage inflation and shrink cited as FY2024 headwinds Continued pressure
Debt actions/leverageBond tender; leverage target ~5x by YE FY23 $165M 2025 notes tender; LTM leverage 6.49x; liquidity ~$1.5B Deleveraging actions continue
Tech/digital/central fillLoyalty/digital growth; central fill expansion Capex focus on tech/digital/DC automation; expanding central fill Execution ongoing

Management Commentary

  • “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.” — Elizabeth “Busy” Burr, Interim CEO .
  • FY2024 outlook assumes headwinds (reimbursement declines, lower COVID vaccines/testing, reduced Elixir lives) partially offset by performance acceleration initiatives (sales comps, non-COVID prescriptions, generic purchasing efficiencies, indirect spend reductions, higher Elixir margins) .
  • “We are implementing a proven turnaround model… partnering with one of the world’s leading consulting firms… driving performance acceleration” (prepared remarks slide deck) .
  • Elixir priorities include improved procurement economics, expanded network access, broker/TPA relationships, and relaunch of claims adjudication software Laker as-a-service .

Q&A Highlights

  • Sale-leasebacks: modest rent impact from FY2023 sale-leasebacks; ~60–70 owned stores remain, and management continues to evaluate additional sale-leasebacks in FY2024 .
  • FY2024 cadence: management expects Adjusted EBITDA to be higher in the second half as cost reductions and acceleration initiatives ramp .
  • Headwinds recap: reimbursement rate pressure, cycling COVID demand, wage inflation, and shrink were reiterated as key FY2024 constraints .

Estimates Context

  • S&P Global consensus estimates were unavailable via our SPGI tool due to a mapping limitation for RADCQ (ticker not mapped); therefore SPGI estimates could not be retrieved.
  • Publicly reported consensus points indicate an EPS miss (Adjusted EPS $(1.24) vs. consensus $(0.77)) and Adjusted EBITDA beat ($128.6M vs. ~$101M) .
  • Company press release also characterized Q4 results as “above consensus,” without quantifying specific revenue/EPS consensus figures .

Key Takeaways for Investors

  • Near-term: The mix of EPS miss vs. Adjusted EBITDA beat and a second-half weighted FY2024 guide suggests trading skew to execution on SG&A and procurement initiatives; watch script growth durability and shrink trends .
  • Retail pharmacy momentum is real (scripts and sales comps), but reimbursement and COVID normalization can offset margin gains; pricing, adherence programs, and central fill execution are key levers .
  • Elixir’s margin improvement is encouraging despite lower lives; procurement economics and member mix should support FY2024 margin targets (Elixir EBITDA $100–$110M) .
  • Balance sheet/liquidity: $165M notes tender, leverage 6.49x LTM, and ~$1.5B liquidity; additional sale-leasebacks possible but rent impact modest; track deleveraging progress and refinancing path .
  • Guidance implies EBITDA growth vs. FY2023; delivery depends on cost actions and retail/Elixir execution; H2 weighting raises event risk around timing; monitor quarterly cadence vs. plan .
  • Execution catalysts: generic purchasing efficiencies, indirect spend reductions, digital/technology capex (DC automation, central fill), and adherence programs .
  • Risk watchlist: reimbursement pressure, shrink, wage inflation, litigation/Opioid exposure, store closure execution, and PBM client retention/membership .