Sluggish sales, capital projects put crimp in Rite Aid's earnings

Drug Store News, Jan 17, 1994

CAMP HILL, Pa. -- Rite Aid corporate sales rose, but net income dropped in the third quarter ended Nov. 27, 1993. Sluggish sales growth and capital spending on new stores and automation put a drag on earnings, according to the company.

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Sales for the quarter were $1.08 billion, a 6.8 percent increase over the $1.01 billion reported for the same quarter last year. But Rite Aid's net income declined to $23 million from $26.4 million for the same period last year.

For the 39 weeks, revenues advanced 6.8 percent to $3.18 billion, compared to $2.98 billion for the comparable period last year. Total company earnings dipped to $80.7 million vs. $86.6 million reported last year.

Drug profits dip

Net income for the American Discount Auto Parts, Concord Custom Cleaners and Sera-Tec Biologicals divisions increased for the period. But the Encore Books operation continued operating at a net loss, and the Rite Aid Retail Drug Store division also reported a decrease in net income.

The retail drug division's sales grew 6.6 percent to $1.01 billion, compared to $946.5 million last year, but net income fell to $20.7 million compared to last year's $24.5 million.

Year-to-date sales rose 6.8 percent to $2.98 billion from $2.79 billion, and net income was $73.9 million vs. $79.8 million reported one year earlier.

The dip in earnings was blamed on an insufficient rise in comparable store sales. Sales in drug stores open more than a year increased 2.8 percent for the quarter and 3.1 percent for the nine-month period.

"Comparable-store sales were up only a small percentage, not at the level needed to support many of the corporation's costs," said Frank Bergonzi, Rite Aid's senior vice president of finance.

Investment costs

Among those costs were the addition of 106 new Rite Aid stores, the chainwide installation of a POS system and the installation of a chainwide satellite communications system.

Bergonzi said after two quarters of poor earnings, the chain was "very optimistic that there will be improvement in the first quarter of 1994.

"We are already beginning to see some improvement in same-store sales," he said.