Harrisburg, Pa. Rite Aid Corp. said Thursday that it swung to a big loss in its first quarter as it continues to spend heavily to absorb more than 1,850 newly acquired stores and offered promotions on items such as food and toiletries that hurt profit margins, according to the Associated Press.
Rite Aid also said it has turned around the declining sales in the Brooks and Eckerd stores it acquired last year, and is a matter of several months away from full integration.
The loss by Rite Aid after paying preferred stock dividends was $162.8 million compared to a profit of $19.5 million in the same period a year ago.
Complete integration and remodeling of the acquired stores is expected by October, and Rite Aid converted all of the acquired Brooks and Eckerd store systems during the quarter, Rite Aid said.
"While the business environment remains challenging, we expect that completing the minor remodels, sales turning positive in the acquired stores and new pharmacy and front-end initiatives will contribute significantly to strong results in the second half of the fiscal year," Mary Sammons, Rite Aid's chairman, president and CEO, said in a statement.
Revenues rose to $6.61 billion from $4.46 billion a year ago. The 2007 figure was before it acquired the Brooks and Eckerd stores.
Rite Aid also said cash flow increased, as did gross pharmacy margins, but promotions of front-end items such as food and toiletries hurt non-pharmacy margins. It also listed about $160 million in charges that it said were expected because of the acquisition, and it spent about $32 million more to close 68 stores, mostly to combine an acquired store with another nearby.