FINANCE

Rite Aid Q4 revenue up on pharmacy same-store sales gains

BY Michael Johnsen

Camp Hill, Pa. — In the wake of acquiring Houston-based RediClinic, Rite Aid on Thursday reported revenues of $6.6 billion for the fourth quarter ended March 1, resulting from a 2.2% lift primarily attributed to an increase in pharmacy same-store sales. For the full year, Rite Aid reported $25.5 billion in revenues, up 0.5%.

For the fourth quarter, the company reported net income of $55.4 million or $0.06 per diluted share, and adjusted EBITDA of $356.3 million, or 5.4% of revenues. For the full year, Rite Aid reported net income of $249.4 million or $0.23 per diluted share, and adjusted EBITDA of $1.3 billion, or 5.2% of revenues.

"Thanks to the strong teamwork of our dedicated Rite Aid associates, we delivered strong fourth-quarter and fiscal 2014 results, including new company records for fourth-quarter and full-year adjusted EBITDA," stated Rite Aid chairman and CEO John Standley. "These accomplishments reflect the significant progress we’re making in executing key initiatives and delivering on our promise to actively work with our customers to keep them well," he said. "Our recent acquisitions of Health Dialog and RediClinic, our expanded partnership with McKesson and our continued commitment to investing in our store base have positioned us to transition our strategy from turnaround to growth as we more aggressively pursue opportunities to become a growing retail healthcare company."

Same-store sales for the quarter increased 2.1% over the prior year, consisting of a 3.5% increase in pharmacy sales, partially offset by a 0.7% decrease in front-end sales. Pharmacy sales included an approximate 123 basis point negative impact from new generic introductions. The number of prescriptions filled in same stores decreased 1.8% over the prior year period, with 1.3% of this decrease being driven by a decrease in flu-related prescriptions and flu shots. Prescription sales accounted for 67.5% of total drug store sales, and third party prescription revenue was 97.1% of pharmacy sales.

In the fourth quarter, the company relocated two stores, remodeled 94 stores and expanded three stores, bringing the total number of wellness stores chainwide to 1,215. The company also closed eight stores, resulting in a total store count of 4,587 at the end of the fourth quarter.

Comparable sales for the year increased 0.7% consisting of a 1.2% increase in pharmacy sales, partially offset by a 0.2% decrease in front-end sales. Pharmacy sales included an approximate 232 basis point negative impact from new generic introductions. The number of prescriptions filled in same stores decreased 0.3% over the prior year period. Prescription sales accounted for 67.9% of total drugstore sales, and third party prescription revenue was 97% of pharmacy sales.

For the year, the company relocated 11 stores, acquired one store, remodeled 405 stores, expanded four stores and closed 37 stores.

Rite Aid said it expects sales for fiscal 2015 to be between $26 billion and $26.5 billion with same-store sales expected to range from an increase of 2.5% to an increase of 4.5% over fiscal 2014.

The company’s outlook for fiscal 2015 is based on the anticipated benefits of its wellness remodels, customer loyalty program, new pharmacy sourcing arrangement with McKesson and other initiatives to grow sales and drive operational efficiencies. The company’s outlook also considers planned wage and benefit increases, the introduction of new generics in the second half of fiscal 2015, generic drug price increases and a challenging reimbursement rate environment.

Capital expenditures are expected to be approximately $525 million. This number does not include the purchases of Health Dialog or RediClinic, Rite Aid noted.

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Winter deals Pier 1 a difficult fourth quarter

BY CSA STAFF

Pier 1 Imports president and CEO Alex W. Smith described fiscal 2014 as a transformational year for the company, emphasizing the company’s continued focus on its ‘1 Pier 1’ strategy, which has evolved its operating model from a broad portfolio of stores to a true omnichannel retail business.

But the company had a difficult fourth quarter marked what it described as an unusually high number of snowstorms, which impacted approximately two-thirds of its selling days in many of its key markets.

“During the year we added new functionality and services to our e-commerce capabilities and began positioning our stores as facilitators and ambassadors for Pier1.com,” said Smith, emphasizing the positive. “We are working hard to improve the Pier 1 Imports brand experience in every way — strengthening our store portfolio with new and relocated stores and continually enhancing our ability to provide customers with a seamless shopping experience. As a testament to the early success of ‘1 Pier 1’, e-commerce delivered 4% of total sales in its sophomore year — well on its way to achieving our targeted sales contribution of 10% by the end of fiscal 2016.”

Smith added that in fiscal 2015 the company is anticipating a comparable store sales increase in the high single-digits and earnings per share growth of 15% to 23%.

“We expect growth to be driven by our ‘1 Pier 1’ strategy, expanded product assortments and increased customer engagement. With the spring season officially underway, we are enthusiastic about the strong customer response to our merchandise — including our latest seasonal offerings — and believe the business is well positioned to regain momentum,” added Smith.

Net income for the 13-week period ended March 1 — which had one fewer week than last year’s fourth quarter — was $42.6 million, or $0.41 per share, compared to $61.7 million, or $0.58 per share in the 14-week period ended March 2, 2013.

Total sales for the quarter were $515.8 million compared to $551.6 million in the 14-week period last fiscal year. Comparable store sales decreased 4.6% compared to the 13-weeks ended February 23, 2013. Adjusting for the additional week in fiscal 2013, comparable store sales for the quarter actually increased 0.6% over the 13-week period ended March 2, 2013.

Gross profit in the fourth quarter totaled $214.4 million compared to $255 million in the fourth quarter of fiscal 2013. As a percentage of sales, gross profit totaled 41.6% versus 46.2% last year, reflecting increased promotional activity during the period, coupled with a deleveraging of occupancy costs resulting from lower sales.

Net income for the full year was $107.5 million, or $1.01 per share, compared to $129.4 million, or $1.20 per share in the 53-week period ended March 2, 2013. The company estimates that the additional week of fiscal 2013 contributed $29 million to net sales and approximately $0.03 to earnings per share.

Total sales for the year increased 3.9% to $1.8 billion, from $1.7 billion in the 53-week period last fiscal year. On a 52-week basis, comparable store sales for fiscal 2014 increased 2.4% versus an increase of 7.5% for fiscal 2013.

Gross profit increased to $745.6 million, or 42.1% of sales, compared to $743.1 million, or 43.6% of sales, in fiscal 2013.

In conjunction with its fourth quarter and full year results, the company said that it is seeking commitments for a $200 million senior secured term loan B facility due in 2021. Bank of America Merrill Lynch and Wells Fargo Securities are serving as joint lead arrangers for the proposed transaction. The proceeds from the new term loan are intended to be used for general corporate purposes, including for working capital needs and capital expenditures, and share repurchases and dividends permitted under the debt agreement. The proposed transaction is subject to market conditions, negotiation and execution of definitive documents and satisfaction of customary closing conditions.

Looking ahead, because of the challenging fourth quarter and lower-than-expected financial results in fiscal 2014, management is updating its three-year growth plan. The company now expects to achieve sales per retail per sq. ft. of $225 and operating margins of approximately 11% to 11.5% by the end of fiscal 2016. This compares to previous expectations for sales per retail sq. ft. of $225 and operating margins of 12% by the end of fiscal 2015. The company remains on track to achieve e-commerce sales representing at least 10% of total sales by the end of fiscal 2016.

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FINANCE

Family Dollar to close 370 stores, cut jobs and reduce prices after tough Q2

BY Dan Berthiaume

Matthews, N.C. – Family Dollar Stores Inc. plans to close about 370 underperforming stores , cut jobs and lower prices on 1,000 basic items on the heels of a disappointing second quarter. The retailer is also slowing its new store growth beginning in fiscal 2015 to bolster its return on investment. It now anticipates opening 350 to 400 new stores as opposed to approximately 525 stores in 2014.

Family Dollar’s net income in the quarter ended March 1, 2014, dropped 35% to $90.9 million from $140.1 million in the year-ago period. Net sales decreased 6.1% to $2.7 billion, from $2.9 billion.

Same-store sales declined 3.8% as a result of decreased customer transactions, partially offset by an increase in the average customer transaction value. Family Dollar cited the extra week in last year’s quarter, as well as severe weather, holiday promotions and a challenging consumer environment, as impacting performance.

“Our second quarter results did not meet our expectations,” said Howard R. Levine, chairman and CEO. “The 2013 holiday season was challenged by a more promotional competitive environment and a more financially constrained consumer. In addition, like many retailers, our second quarter results were significantly impacted by severe winter weather, which resulted in numerous store closings, disrupted merchandise deliveries and higher than expected utility and store maintenance expenses.”

The chief executive went on to say that the company was not satisfied with its performance and would implement a number of initiatives to improve things, including the price cuts, store closings and staff reductions along with re-aligning key organizational functions. The job cuts and store closures are expected to reduce annual operating costs by $40 million to $45 million beginning third quarter of fiscal 2014.

Family Dollar expects to record an estimated $85 million to $95 million restructuring charge in the second half of fiscal 2014 related to the workforce reductions and store closures.

For the third quarter of fiscal 2014, Family Dollar expects that same-store sales will decline in the low-single-digit range and for the fourth quarter of fiscal 2014, the company expects that same-store sales will be flat to up slightly. Family Dollar also expects a low-single digit increase in net sales during the full fiscal year.

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