June 26, 2008 / 12:24 PM / 10 years ago

UPDATE 2-Rite Aid posts wider-than-expected Q1 loss, shares sink

(Adds conference call details in paragraph 10, share movement)

June 26 (Reuters) - Rite Aid Corp (RAD.N), the No. 3 U.S. drugstore chain, posted a wider-than-expected quarterly loss, hurt by higher operating costs and acquisition-related expenses, sending its shares to their lowest in at least two decades.

Separately, Rite Aid also said it was offering $425 million of senior secured notes due in 2016, which is part of a previously announced refinancing of about $700 million of debt.

Charges related to the refinancing could impact net loss and loss per share, the company added.

Rite Aid shares, which have lost more than three-quarters of their market value since hitting a 52-week high of $6.51 in June last year, plunged 15 percent to a low of $1.48 Thursday on the New York Stock Exchange.

For the first quarter ended May 31, the company reported a net loss of $156.6 million, or 20 cents a share, compared with a profit of $27.6 million, or 4 cents a share, a year earlier.

However, revenue jumped 49 percent to $6.61 billion, boosted by sales at Brooks and Eckerd drugstores, which it acquired from Canada’s Jean Coutu Group Inc PJCa.TO in 2007 to compete better with larger rivals Walgreen Co WAG.N and CVS Caremark (CVS.N).

Analysts on average expected a loss of 10 cents a share, before special items, on revenue of $6.67 billion, according to Reuters Estimates.

The company said expenses related to the Brooks and Eckerd deal included an increase in depreciation and amortization expense of $77.1 million, additional interest expense of $49.5 million and a rise in integration expense of $33.3 million.

It also recorded an increase in store closing and impairment charges of $32.2 million during the quarter. Selling, general and administrative expenses grew 60 percent.

A company executive said on a conference call with analysts that Rite Aid may close between 25 and 40 stores and combine several more pairs of Brooks and Eckerd and Rite Aid stores during the rest of the year.

Rite Aid operates more than 5,000 stores that fill prescriptions and sell health and beauty aids, convenience foods and greeting cards, among other items.

The company said same-store sales rose 1.5 percent in the first quarter, with pharmacy sales increasing 1 percent and front-end sales rising 2 percent.

The results, except for same-store sales, reflect the acquisition of the Brooks and Eckerd stores.

Rite Aid reaffirmed its fiscal 2009 loss view of 34 cents to 48 cents a share on sales of $26.7 billion to $27.2 billion.

Analysts expect a loss of 42 cents a share, before special items, on revenue of $26.85 billion.

The company said it expects fiscal 2009 same store sales, including nine months of sales from Brooks and Eckerd stores, to rise between 2 percent and 4 percent.

Shares of the Camp Hill, Pennsylvania-based company were down 25 cents at $1.50 in late afternoon trade. (Reporting by Anne Pallivathuckal in Bangalore; Editing by Himani Sarkar)

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