HARRISBURG, Pa. – A huge tax credit in the fourth-quarter helped Rite Aid Corp. (RAD) overcome disappointing sales and quadruple its earnings. Its shares slipped.
The nation's third-largest drugstore chain behind Walgreen Co. (WAG) and CVS Corp. (CVS) reported Thursday it earned $223.5 million available to common shareholders, or 35 cents per share, for the quarter ending Feb. 26. In the same quarter a year earlier, the company earned $53.5 million, or 9 cents a share, on the same basis after costs for preferred stock dividends.
Much of the improvement was due to a one-time item from a benefit on deferred tax assets. Without that $179.5 million credit, the company earned $43.9 million, or 6 cents a share. Analysts surveyed by Thomson First Call had predicted a loss of 3 cents per share excluding one-time items.
Revenues for the quarter dropped to $4.34 billion, down 1 percent from $4.4 billion last year. Sales in stores that were open at least a year also slid almost 1 percent, the company said.
In September, the company began revising its sales projections for the year, blaming the United Auto Workers' (search) mail-order drug policy, sluggish medicine sales due to a late-arriving flu season, and lower-than-expected reimbursement rates paid by insurance companies and other health plans.
"We had a difficult quarter as we continued to feel the negative impact of the United Auto Workers mandatory mail program," Mary Sammons, Rite Aid's president and chief executive, said in a statement Thursday.
But she said the company is getting back on track. It is starting its own pharmacy benefit management company that can mail prescriptions and plans to open about 80 new and relocated stores in the 2006 fiscal year, she said.
For the year, Rite Aid said its earnings available to common shareholders was $299.8 million, or 47 cents a share, after preferred dividend costs, in contrast to a profit of $58.5 million, or 11 cents a share, a year earlier.
Revenue totaled $16.8 billion, up from $16.6 billion last year.
During the quarter, the company opened four new stores, acquired two, remodeled 18, relocated four and closed 13, bringing the total to 3,356 at the end of the period.
The Camp Hill, Pa.-based company also said that, based on current trends, it expects sales of $17.3 billion to $17.7 billion in fiscal 2006 with net income between $45 million and $71 million.
Rite Aid share fell 4 cents, or 1.1 percent, to $3.73 on the New York Stock Exchange.