* Rite Aid hurt by weak pharmacy, seasonal-item sales
* EPS loss 18 cents v. Street view 16 cents
* Sales fall 2.5 pct to $6.16 bln; miss Street view
* Shares fall about 14 percent
(Recasts, adds analyst comment, updates share prices)
By Emily Stephenson
CHICAGO, Sept 23 Drug store operator Rite Aid
Corp (RAD.N) posted disappointing quarterly results on weak
sales of prescriptions and seasonal items, and cut its
full-year forecast, sending its shares tumbling 14 percent.
Sales of drug-store items such as beauty supplies improved
in Rite Aid's fiscal second quarter, but sales of seasonal
items such as lawn chairs and pool toys were weak.
"Some of the core categories appear to be stabilizing and
growing," Chief Executive John Standley said. "Where we're
still fighting a little bit is really in our seasonal
categories and general merchandise. Those are really the
categories that we've got to get going here."
Rite Aid, the nation's third-largest drug store chain
behind Walgreen Co WAG.N and CVS Caremark Corp (CVS.N),
lowered its forecast for fiscal 2011 on Thursday to a loss of
46 cents to 67 cents per share, from a prior forecast for a
loss of 41 cents to 65 cents a share.
Analysts had expected a loss of 50 cents per share.
Rite Aid reported a quarterly net loss of $197 million, or
23 cents a share, in its fiscal second quarter ended on Aug.
28, compared with a year-earlier loss of $116 million, or 14
cents a share.
Excluding items, the loss was 18 cents a share, which was
deeper than the 16 cent-per-share loss analysts on average were
expecting, according to Thomson Reuters I/B/E/S.
Revenue for the quarter fell 2.5 percent to $6.16 billion,
slightly below analysts' average estimate of $6.19 billion.
The U.S. retail sector has been hurt by the recession as
consumers tighten their budgets, but drug stores have felt
another hit as people cut back on doctor visits and fill fewer
Rite Aid's quarterly same-store sales fell 1.5 percent,
with a 0.9 percent decline of front-end products and a 1.8
percent drop in pharmacy sales as more lower-priced generic
drugs were introduced.
Rite Aid has not been able to boost sales as effectively as
its larger rivals, said Morningstar analyst Matthew Coffina.
He said current initiatives, such as a new customer rewards
program that has 22 million members and emphasizes training
pharmacists to administer flu shots, were strategies other
retailers were already using.
He said Rite Aid stores' sales per square foot are about 30
percent lower than its key rivals'.
"It's not really anything that's going to help them with
their more fundamental problems," Coffina said, pointing to
Rite Aid's debt load and cost-cutting efforts which he said may
have impacted customer service at stores.
Coffina said a pilot partnership with Supervalu Inc (SVU.N)
to add Save-A-Lot grocery stores to Rite Aid stores in South
Carolina could boost store efficiency, but the 10-store test is
too small to make a difference in the short term.
Rite Aid shares fell as low as 92.6 cents before trading
down 15 cents, or 13.6 percent, at 95 cents on the New York
Stock Exchange late Thursday afternoon.
As of Wednesday's close, they had risen 2.8 percent since
June 23 when Rite Aid last reported results. Walgreen shares
were up 5.9 percent and CVS fell 4.3 percent over the same
(Reporting by Emily Stephenson; Editing by Martinne Geller,
Maureen Bavdek, Dave Zimmerman and Richard Chang)