FINANCE

Rite Aid beats estimates as Q3 profit soars

BY Marianne Wilson

Rite Aid Corp. on Wednesday posted a big jump in quarterly profit as the drug store retailer benefited from its ongoing sale of 1,932 stores to Walgreens Boots Alliance Inc.

Net income rose to $81.03 million, or 8 cents per share, in the quarter ended Dec. 2, from $15.01 million, or 1 cent per share, in the year-ago period. Analysts had projected a loss of two cents per share.

Total revenue fell 5.6% to $5.4 billion from $5.7 billion last year. Same-store sales fell 2.5%, consisting of a 3.5% decline pharmacy sales and a 0.5% decrease in front-end sales.

“The third quarter was a busy time for our team in preparing for and beginning the transfer of stores and related assets to Walgreens Boots Alliance,” said Rite Aid chairman and CEO John Standley. “To date, we have transferred 357 stores and have received approximately $715 million in proceeds, which we have used to pay down debt. Looking forward, in addition to completing the transfer process, we will continue to focus on our most significant business-building opportunities as we work together to deliver a great experience to our customers and patients.”

In the third quarter, the company sold 97 stores to Walgreens and closed seven stores, resulting in a total store count of 4,404 at the end of the third quarter.

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Pier I taps retail vet to head up finance

BY Marianne Wilson

Pier 1 Imports has found its new CFO.

The home décor retailer appointed the appointment of Nancy A. Walsh, 57, as executive VP and CFO, effective January 25, 2018. Darla D. Ramirez will step down as interim CFO when Walsh’s appointment becomes effective. She will continue to serve as the company’s principal accounting officer and VP – controller of the company’s operating subsidiaries.

Walsh joins Pier 1 from The Bon-Ton Stores, where she served as executive VP and CFO since 2015. Previously, she spent 14 years in the finance organization at Tapestry (formerly Coach), including serving as senior VP, finance, a role she held for six years. Earlier in her career, Walsh held positions in finance and treasury with Viacom and Timberland Company.

“Nancy comes to Pier 1 Imports with an extensive background in finance and retail,” said Alasdair James, president and CEO, Pier I Imports. “She has spent the better part of her 30-year career amidst iconic brands, home furnishings and specialty retail. We are confident Nancy has the financial skills and leadership needed to drive the strategic plans we’re presently developing.”

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Casey’s responds to call for sale by investors

BY Marianne Wilson

JCP Investment Management, BLR Partners LP and Joshua E. Schechter want Casey’s General Stores to explore alternatives, including a sale or merger, believing the company offer more value in a sale than as a standalone company.

The three firms, who collectively own approximately $45 million of Casey’s common stock, issued a biting open letter to the retailer’s shareholders, saying the company has “significantly” underperformed industry leader Alimentation Couche-Tard Inc. since Casey’s decision to reject ATD’s offer and remain independent in 2010. Casey’s has also underperformed Murphy USA Inc. since Murphy became an independent company, according to the letter.

“Casey’s no longer delivers best-in-class returns as measured by either operating metrics or share price performance,” the letter stated. “Casey’s has missed earnings targets for seven straight quarters due in part to decelerating same store sales and bloated operational expenses.”

Casey’s wasted no time in issuing a reply to the letter, noting, among other things, that the three firms calling for the review collectively own approximately 1% of Casey’s outstanding shares. In a statement, the retailer said that its management met with representatives from JCP this past summer, and that they (JCP) did not raise their recommendation that Casey’s explore strategic alternatives, and there has been no substantive engagement with them since that time.

Casey’s also said it has a strong track record of delivering value for shareholders, saying that its five-year total shareholder returns (TSR) of 121% exceed the TSRs of the S&P 500 index (108%) and the S&P Retail index (46%) over the same period.

The letter from JCP also claims that Casey’s has expanded too fast. The company operates more than 2,000 stores in 15 states.

“We are concerned that Casey’s store level returns on invested capital have declined as the company has gone from operating in nine states to 15 states,” the letter stated. “Prior to 2010 (before the offer from ATD), the company had only operated in nine states since 1995. We believe such rapid expansion coupled with seeming declining returns on invested capital is symptomatic of a company that has been unable to manage growth effectively.”

Terry Handley, president and CEO of Casey’s, said that the company is focused on generating increased long-term value for shareholders through new initiatives to accelerate same-store growth and returning cash to shareholders through share repurchases and a steadily increasing dividends.

“With the combination of the company’s growing acquisition pipeline, new store construction activity, new initiatives aimed at enhancing operations – such as digital engagement and price optimization projects – Casey’s expects to deliver substantial value for its shareholders,” he said.

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