Rite Aid Corporation (NYSE:RAD) (“Rite Aid” or the “Company”) announced that management will outline the Company’s corporate strategy and growth plan at its Analyst Day held via webcast today. The Company will provide details on how its strategic initiatives are designed to drive revenue and Adjusted EBITDA growth, as well as reduce the Company’s leverage ratio.
“Rite Aid is a business in the midst of a turnaround and it is time for a radical change – our RxEvolution,” said Heyward Donigan, president and chief executive officer, Rite Aid. “This is not business as usual at Rite Aid. We have the unique opportunity to serve a growing customer base and strengthen the power of our iconic brand. We are doubling down on our pharmacy business. We are renewing our commitment to leverage the power of our trusted pharmacists across our retail and pharmacy services business to deliver on the promise of real consumer engagement. Our pharmacists are among the most accessible and trusted health care professionals in America. This means we really can help our customers not just get healthy, but get thriving.”
Donigan continued, “We have already made significant progress and have built a strong foundation to deliver on our turnaround. Over the past seven months, we have made key changes to our management team, reduced our leverage ratio and instilled an acute focus on execution and innovation. We are in the process of profoundly changing and modernizing the technology platforms that power our company, with a relentless focus on customer experience and design. We are also executing well on our prescription and clinical services growth. Rite Aid is now better positioned to execute on our key initiatives to grow our revenue, achieve efficiencies across our business, drive Adjusted EBITDA growth and generate cash flow to invest in our business and reduce our debt.”
Rite Aid’s strategy for evolving the business and revitalizing the brand will focus on innovation in three areas:
- Becoming the dominant mid-market PBM: Rite Aid’s pharmacy benefits and services company, EnvisionRxOptions, includes multiple PBMs, technology and claims adjudication software, mail delivery and specialty pharmacy services, network and rebate administration, as well as prescription discount programs and Medicare Part D insurance for individuals and groups. With a stronger, integrated offering, this business (soon to be rebranded as Elixir) will be well positioned with mid-market employer groups and regional health plans. Additionally, given the affiliation with Rite Aid’s stores, EnvisionRxOptions has the opportunity to improve its competitive positioning and deliver exceptional retail and mail order pharmacy service while improving clinical outcomes. EnvisionRxOptions is now the only payor-agnostic PBM with a retail pharmacy footprint. Poised for strong growth and improved profits, this unique PBM offering represents the largest enterprise value creation opportunity for Rite Aid.
- Unlocking the value of Rite Aid’s pharmacists: Rite Aid is innovating across all of its retail and mail-order pharmacy channels, including its PBM and suite of pharmacy service solutions. These innovations go beyond just filling prescriptions to offering an array of over-the-counter, clinical and holistic health and wellness solutions – focused on helping customers thrive. Rite Aid’s more than 6,400 pharmacists will be whole-being health advocates, who practice at the top of their license. The Company’s pharmacists will go beyond their traditional role into an expanded role, in which they are encouraging a holistic approach to health. Rite Aid is leveraging its associates to engage with Lean tools and develop new workflows and technologies to free up its pharmacists’ time. Additionally, Rite Aid is launching its new Pharmacy of the Future, which moves the Company’s pharmacists physically closer to the customer. These new workflows, tools and store design will allow pharmacists to engage more meaningfully with Rite Aid customers.
- Revitalizing Rite Aid’s retail and digital experience: As consumers increasingly focus on self-care, they seek to strike the perfect balance between traditional health and holistic wellness. Rite Aid will be a whole-being health destination that treats mind, body and spirit. To introduce new generations to its iconic brand, Rite Aid is elevating its in-store experience, increasing personalized digital engagement, and refreshing merchandise to include a wide assortment of products with attributes that resonate with Millennial and Gen X consumers. Rite Aid will be re-branding with a new logo to signal this bold change in pharmacy and retail. Later this year, Rite Aid will introduce its Store of the Future, which will be a trusted whole-family wellness destination that helps consumers on the journey of care for parents, children and pets.
Rite Aid believes its RxEvolution will deliver meaningful value with a disciplined approach to investments and a focus on initiatives that will generate the greatest return.
Outlook for Fiscal 2020
The Company is narrowing its Fiscal 2020 outlook for Adjusted EBITDA and Revenues and adjusting its outlook for Capital Expenditures.
Rite Aid Corporation expects revenues to be between $21.9 billion and $21.925 billion in fiscal 2020 with same-store sales expected to range from an increase of 1.0 percent to an increase of 1.1 percent over fiscal 2019.
Adjusted EBITDA is expected to be between $530.0 million and $535.0 million.
Capital expenditures are expected to be approximately $215.0 million.
Outlook for Fiscal 2021
The Company is providing the following outlook for fiscal year 2021:
Revenue is expected to be between $22.5 billion and $22.9 billion.
- Retail Pharmacy Segment: Same-store sales are expected to be in the range of an increase of 1.5 percent to an increase of 2.5 percent.
- Pharmacy Services Segment: Revenue is expected to be between $6.75 billion and $6.85 billion (net of any intercompany revenues to Rite Aid retail).
Net loss is expected to be between $91.0 million and $119.0 million.
Adjusted EBITDA is expected to be between $500.0 million and $540.0 million.
Adjusted net (loss) income per share is expected to be between a loss of $0.22 per share and income of $0.19 per share.
Cash flow from operations is expected to be between $400.0 million and $450.0 million.
Capital Expenditures are expected to be approximately $350.0 million.
Rite Aid also expects to incur restructuring charges of approximately $60.0 million in Fiscal 2021, which will not be included in Adjusted EBITDA. These charges include costs to relaunch the brand and to transition out of certain merchandise lines.
Long-Term Financial Outlook
Based on the Company’s strategic initiatives, Rite Aid is providing the following financial targets by fiscal year 2023:
- Pharmacy benefits and services revenue with high-single to low-double digit growth
- Same-store scripts with mid-single digit growth
- Front End revenue with low-single digit growth
- Adjusted EBITDA growth
- Improved Free Cash Flow
- Leverage ratio of approximately 4.0x
Analyst Day Webcast
The Analyst Day presentation will begin today, March 16, 2020 at 9:00 a.m. ET. The simultaneous, live webcast will be available on the Investor Relations section of Rite Aid’s website at: https://www.riteaid.com/corporate/investor-relations/presentations.