Rite Aid Sales Hurt by Mail-Order Drugs

CHICAGO – Drugstore chain Rite Aid Corp. (RAD) on Tuesday warned that full-year profit and revenue would fall short of Wall Street expectations because of slowing pharmacy sales as companies try to curb health-care costs.

The Camp Hill, Pa.-based retailer's shares dropped 10 percent to a 13-month low on Tuesday.

Rite Aid said health benefit payers were "taking additional steps to slow health care spending, and mandatory mail programs have increased." The retailer said it was "developing plans" to better compete with mail-order prescription refill services, but gave no details.

Pharmacy benefit companies, which manage prescription drug plans for employers, have been pushing mandatory mail programs to stem the rise in prescription drug costs.

Medco Health Solutions Inc. (MHS), one of the biggest pharmacy benefit companies, in July said it added 3 million of its members to such programs since the beginning of the year.

Rite Aid said it now expects net income of $122 million to $150 million, or 16 cents to 22 cents per share, for the fiscal year that ends in February.

Analysts, on average, expected earnings of 27 cents per share, according to Reuters Estimates.

Rite Aid forecast full-year sales of $16.9 billion to $17.0 billion, with same-store sales up 2.75 percent to 3.25 percent. It had previously estimated full-year sales at $17.1 billion to $17.3 billion, and same-store sales growth of 3.75 percent to 4.75 percent.

Wall Street was looking for revenue of about $17.4 billion, according to Reuters Estimates.

The retailer also reported a slim 1.0 percent increase in August sales at its stores open at least a year, which it blamed in part on a later Labor Day holiday that pushed some demand into September.

Shares of Rite Aid were off 47 cents, or 10.3 percent, at $4.08 in New York Stock Exchange (search) trading, their lowest point since August 2003.