(Reuters) - Drug retailer Rite Aid Corp (RAD.N) on Thursday forecast a full-year profit largely above estimates as it expects reimbursement rates to rise this year and its deal with Walgreens to help it secure better generic drug prices.
Rite Aid sold half of its stores to Walgreens Boots Alliance Inc (WBA.O) last year after Walgreens’ bid to buy the whole company collapsed due to antitrust concerns. The much smaller Rite Aid then agreed to be bought by U.S. grocer Albertsons Cos Inc, hoping to still remain a formidable player in the sector.
Rite Aid’s shares were up 3 percent at $1.69 in premarket trading.
The drug retailer said it expects full-year 2019 sales of $21.7 billion to $22.10 billion, largely above the average analyst estimate of $21.73 billion. It forecast an adjusted profit of 2 cents to 6 cents per share, compared with the estimate of 3 cents, according to Thomson Reuters I/B/E/S.
In its deal with Walgreens, Rite Aid sold 1,932 stores and secured a 10-year option to purchase generic drugs sourced through an affiliate of Walgreens at cost.
The company said this agreement would benefit its full-year outlook, which does not include the impact of its pending deal with Albertsons.
“We continue to believe the retail pharmacy group is well positioned as healthcare evolves to a more consumer-centric model,” J.P.Morgan analyst Lisa Gill wrote in a pre-earnings note.
For the fourth quarter, the company’s revenue fell to $5.39 billion from $5.90 billion, hurt by a decline in reimbursement rates and prescription volumes. Analysts on average had expected $5.57 billion.
Retail pharmacy sales fell about 10 percent in the quarter, while pharmacy services revenue dropped 4.3 percent.
The company posted net loss from continuing operations of $483.7 million, or 46 cents per share, for the quarter ended March 3, compared with a loss of $25.1 million, or 2 cents per share, a year earlier.
The loss includes $325 million of income tax expense related mainly to the revaluation of the company’s deferred tax assets in connection with the new U.S. tax law.
Excluding one-time items, Rite Aid reported a loss from continuing operations of 1 cent per share, in line with Wall Street estimates.
Reporting by Vibhuti Sharma in Bengaluru; Editing by Sriraj Kalluvila and Saumyadeb Chakrabarty