Rite Aid cuts full-year profit forecast; shares fall
(Reuters) - Rite Aid Corp (RAD.N), the third-largest U.S. drugstore chain, cut its full-year profit forecast, mainly due to Medicare reimbursement cuts and higher cost of some generic drugs, sending the company's shares down as much as 11 percent.
This outlook contrasts that of CVS Caremark Corp (CVS.N), which said on Wednesday that it expected sales and earnings to rise in 2014 and forecast good growth in its pharmacy benefits management business.
The U.S. market for medicines has seen a major shift toward cheaper generic drugs as patents on major branded drugs expired in recent years and efforts to cut healthcare costs increase.
Although generic drugs carry higher margins than branded ones, they can hurt overall revenue because they are sold at lower prices.
Generic drugs now account for more than 80 percent of all prescriptions filled, according to data from IMS Health, which tracks prescription drug data.
Rite Aid cut its full-year profit forecast to 17-23 cents per share from 18-27 cents per share.
Analysts on average were expecting a profit of 24 cents per share, according to Thomson Reuters I/B/E/S.
The company's net income fell to $71.5 million, or 4 cents per share, in the third quarter ended November 30 from $61.9 million, or 7 cents per share.
Analysts on average had expected a profit of 4 cents per share.
Rite Aid shares were down 8.6 percent at $5.26 on Thursday afternoon on the New York Stock Exchange.
(Reporting by Aditi Shrivastava in Bangalore; Editing by Kirti Pandey)
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