(Adds Goldman Sachs analyst's comments in paragraph 21; updates share movement)
By Varsha Tickoo
BANGALORE, April 10 (Reuters) - Rite Aid Corp (RAD.N), the third-largest U.S. drugstore chain, posted a quarterly loss on a big tax charge, and forecast a tough 2009 as it struggles to revamp its business in the face of stiff competition from larger rivals.
Excluding the charge and other items, the fourth-quarter loss was narrower than market estimates -- a respite for Rite Aid that has lately been plagued by sluggish holiday sales, a weak flu season and cheap generic drugs cutting into sales.
Rite Aid operates more than 5,000 stores that fill prescriptions, which account for nearly two-thirds of sales, and sell health and beauty aids, convenience foods and greeting cards, among other items.
Rite Aid, whose market value has dropped by 57 percent over the past year, did not have sound business strategies compared with larger rivals Walgreen Co WAG.N and CVS Caremark (CVS.N), Raymond James analyst John Ransom said.
"You've got PBMs (pharmacy benefits managers) pushing mail-order and you've got Wal-Mart (WMT.N) making a reinvigorated push into the prescription market," Ransom said.
As rivals try to lure more customers by making it easier for them to buy and receive products, Rite Aid needs to especially ramp up its mail-order operations, Ransom said.
"They need to shrink the company, they need to probably sell off 1,000 to 1,500 stores in markets where they don't compete... and retreat back to a footprint they can defend," the analyst said.
The company bought the Brooks and Eckerd drugstore chains from Canada's Jean Coutu Group Inc (PJCa.TO) in 2007 for about $4 billion to compete better with Walgreen and CVS Caremark.
But front-end sales at the acquired stores fell during the latest fourth quarter.
The company had cut its fiscal-2008 revenue and same-store sales forecast in December, but on Thursday posted annual results that nevertheless disappointed Wall Street.
"They (Rite Aid) tend to produce optimistic guidance and then miss... not dramatically but a little bit and I think this was another example where they missed," Ransom, who has a "sell" rating on the stock, said.
For the latest fourth quarter, the company posted a net loss of $952.2 million, or $1.20 a share, compared with a profit of $15.1 million, or 1 cent a share, a year earlier.
Excluding charges related to an income tax charge, and other expenses connected to its acquisition of the Brooks and Eckerd drugstore chains, the loss would have been 6 cents a share.
Revenue rose 51 percent to $6.82 billion, while same-store sales rose 1.3 percent.
Analysts on average expected a loss of 8 cents a share, before special items, on revenue of $6.89 billion, according to Reuters Estimates.
The number of prescriptions increased, but pharmacy same-store sales were hit by the introduction of new generics, the company said.
Same-store sales for the quarter do not include results from the Brooks Eckerd stores.
For 2009, Camp Hill, Pennsylvania-based Rite Aid forecast a net loss that was more than double the market estimate as prescription growth and pharmacy reimbursement rates slow.
The company forecast a net loss of 34 cents to 48 cents a share for 2009, on sales of $26.7 billion to $27.2 billion.
Analysts were expecting a loss of 15 cents a share, on revenue of $27.27 billion.
Goldman Sachs analyst John Heinbockel said the 2009 outlook "leaves much to be desired" and cut Rite Aid's price target by 11 percent to $2.90. Heinbockel has a "neutral" rating on the stock.
A Rite Aid official said on a conference call, "As we've said in the past, we are recession resistant, but not recession-proof."
But Rite Aid, which with Thursday's results has reported losses for three straight quarters, faces a tough task in weathering the turmoil.
Shares of Rite Aid fell 8 percent to $2.51, before recovering slightly to trade down 17 cents at $2.57 in afternoon trade on the New York Stock Exchange. (Additional reporting by Dhanya Skariachan; Editing by Pratish Narayanan)