Retail remained the main focus of Rite Aid with a majority of the revenue was coming through the sale of prescription drugs and front-end products at the company’s 2,464 retail stores. However, the company has been facing a shortfall in the stores’ traffic due to mounting pressure from e-commerce. Hence, the company opted for store closing in order to face higher costs and expenses.
The margins were hurt by reimbursement rate declines despite generic purchasing efficiencies and the increase in same-store prescription count. The company has strong labor and expense control at the stores as well as labor savings and expense management relating to the recent corporate restructuring. This has aided in the bottom-line growth, which is expected to continue in the future.
For the second quarter, the company swung to a profit from a loss last year, helped by lower costs and expenses. In the Retail Pharmacy segment, revenues edged down 1.6% hurt by store closures, even though same-store sales modestly increased 0.4%. Pharmacy sales have been negatively impacted by new generic introductions.
As of August 31, 2019, Rite Aid has $142.18 million of cash and cash equivalents while long-term debt stood at $3.83 billion and the accumulated deficit remained at $4.95 billion. The company has been aggressive in financing its growth with debt due to high risk. The share value is pressurized by the cost of debt financing outweighing the bottom-line results.
The company plans to use cash flow from operations along with available borrowings and other sources of liquidity for meeting working capital, debt, and capital expenditures requirements until the end of next year. Rite Aid’s liquidity position is expected to remain strong throughout fiscal 2020.