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Rite Aid shares plummet; CEO cites Covid uncertainty for drug store chain’s cautious outlook

Rite Aid shares plummet; CEO cites Covid uncertainty for drug store chain’s cautious outlook

24 Jun 2021

Rite Aid CEO Heyward Donigan told CNBC on Thursday she’s “cautiously optimistic” the U.S. would avoid another round of strict Covid restrictions despite the presence of the delta variant.

“We all hope that enough people get vaccinated that we don’t have the variant become so significant that our markets shut down again,” Donigan said on “Squawk Box.”

Even so, the chief executive said the drug store chain was being judicious with its financial projections due, in part, to how unpredictable the coronavirus pandemic’s impact on business has been.

Shares of Rite Aid sank roughly 14% on Thursday, sending the company’s stock market value under $1 billion, as Wall Street digested mixed first-quarter results and weaker earnings guidance.

Rite Aid’s forecast for adjusted EBITDA — earnings before interest, taxes, depreciation and amortization — came in at $440 million and $480 million in fiscal year 2022, below estimates of $524 million, according to FactSet.

“We’re being very cautious because we had a miss last quarter due to the complete meltdown, I’ll call it, of cough, cold, flu — both in the pharmacy and in the front end because there just was no cough, cold, flu,” Donigan said, alluding to the recent surprisingly calm flu season in the U.S. and its impact on Rite Aid.

“We just didn’t realize how far down, how evaporated that business would actually be. So as we look forward, we think we need to be very cautious and prudent in our guidance,” said Donigan, who has been CEO of Pennsylvania-based Rite Aid since August 2019.

“We are expecting some improvement. We’re not expecting full improvement,” Donigan added.

She also acknowledged, “It’s very hard, it remains very hard to predict, a full-year result in a retail pharmacy in the middle of a pandemic because we are … still in the throes of this to some degree.”

The company projected full-year revenue of between $25.1 billion and $25.5 billion, which exceeded Wall Street’s expectations of $24.66 billion, according to FactSet.

Rite Aid’s outlook is not factoring in potential Covid vaccine boosters or vaccinations for children under the age of 12, Donigan noted. Trials examining the vaccine in kids under age 12 are currently ongoing.

The Food and Drug Administration cleared Pfizer’s Covid vaccine for use in kids ages 12 to 15 a little more than a month ago. Moderna, which also makes a two-dose vaccine, has asked the FDA to expand its emergency use authorization to cover adolescents from 12 to 17.