Rite Aid Turns a Corner

Rite aid posted its first quarterly profit in 5½ years, as shoppers filled more prescriptions and stuck around to buy more incidentals in renovated stores. Shares jumped 18%, or 19 cents, to $1.24 in recent trading as investors were cheered by the news. Rite Aid, which also offered an improved fiscal 2013 per-share earnings target, last reported a profitable quarter in summer 2007.

The company’s firmer footing can be attributed to several factors. Rite Aid has cut costs and refinanced billions of dollars in debt. Rite Aid’s results have also been bolstered by the retailer’s loyalty program rollout and store renovations under a new format that expands clinical pharmacy services and offers more health and wellness products. Rite Aid remodeled 114 stores during the latest quarter and has in total converted 687 locations into the new wellness format. Rite Aid’s results have also been helped by a jolt in the number of prescriptions the company filled at its stores after millions of customers transferred their prescriptions when Walgreen exited pharmacy-benefits manager Express Scripts Holding Co.’s network at the beginning of 2012.

For the quarter ended Dec. 1. 2012, Rite Aid reported a profit of $61.9 million, or seven cents a share, compared with a loss of $52 million, or six cents a share, a year earlier.

Since 2007 Rite aid has recorded net losses. Rite Aid, using LIFO method, hasn’t needed to pay tax or dividends, since they haven’t had net income for a while. However, investors were not happy about Rite Aid’s performance. Due to several reasons the article previously mentioned, Rite Aid restarted to record net income instead of net loss.

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