Shares of Rite Aid (NYSE: RAD) were looking downright healthy on Thursday as the stock surged by as much as 15.5%. As of 12:05 p.m. ET, the stock was still up by 15.2%.
The catalyst that sent the retail drugstore chain soaring was its fiscal 2023 first-quarter financial report, which was far better than investors had expected.
For the quarter, which ended May 28, Rite Aid reported revenue of $6.01 billion, down 2.3% year over year. While that might not seem worth writing home about, it’s important to put that into context. Last year at this time, a major wave of COVID-19 vaccinations was boosting Rite Aid’s top line. Current profits also took a hit in its latest quarter. The company delivered an adjusted net loss of $0.60 per share, compared to adjusted net income of $0.38 per share in the prior-year period.
Still, the results were surprisingly good considering that analysts’ consensus estimates had been for revenue of $5.7 billion and a loss of $0.70 per share. Rite Aid beat those expectations by wide margins.
There was more good news. Retail comparable-store prescriptions increased by 0.9%, while comparable-store non-COVID acute prescriptions jumped by 11.9%. These same-store-sales metrics point to a strengthening pharmacy business in the face of tough comparisons.
It wasn’t just Rite Aid’s fiscal Q1 performance that had investors excited. The company also raised its sales outlook for the fiscal year. Rite Aid now expects fiscal 2023 revenue in a range of $23.6 billion to $24 billion, up from its previously forecast range of $23.1 billion to $23.5 billion.
Greater non-cash impairment charges for closed stores and recent interest rate increases are expected to take a bigger toll on its bottom line. The company now expects a loss in the neighborhood of $225 million at the midpoint of its new guidance range. Its previous forecast loss range had a midpoint of $189 million. On the bright side, Rite Aid expects to be free cash flow positive for the year.
Challenges remain for the drugstore chain, including its hefty debt load and rising interest rates. That said, on Thursday, investors were celebrating Rite Aid’s better-than-expected results as a step in the right direction.