Rite Aid stock tanks after it lowers earnings expectations

Rite Aid stock lost 7.4 percent Thursday after the company said it experienced higher-than-expected drugs costs. Rite Aid expects to earn 30 to 40 cents per share of stock in fiscal 2015 instead of 31 to 42 cents.

Matt Rourke/AP/File
A woman exits a Rite Aid store, in Philadelphia. The drug chain lowered its earnings guidance for fiscal 2015 on Thursday, June 5, 2014, triggering a big drop in Rite Aid stock.

Rite Aid Corp. has lowered its earnings expectations for fiscal 2015 after the drugstore chain experienced higher-than-expected drug costs and reimbursement rate reductions in its recently concluded quarter.

The Camp Hill, Pennsylvania, company's stock skidded Thursday morning before markets opened and after it announced the change.

The nation's third largest drugstore chain said it now expects to earn between $298 million and $408 million, or 30 cents to 40 cents per share, in fiscal 2015. In April, it had forecast earnings of $313 million to $423 million, or 31 cents to 42 cents per share.

Analysts expect, on average, 39 cents per share, according to FactSet.

Rite Aid also said it expected adjusted earnings in its fiscal first quarter, which ended May 31, to trail its performance in last year's quarter. It will report results from the latest quarter on June 19.

In May, Rite Aid's revenue from stores open at least a year climbed 3.5 percent. Pharmacy revenue rose 5 percent, while sales from the front end, or the rest of the store, were up slightly.

Revenue from stores open at least a year is considered a key indicator of a retailer's financial health because it strips away the volatility of recently opened or closed stores.

Rite Aid shares fell more than 9 percent or 79 cents, to $7.71 less than an hour before trading started Thursday.

The shares had climbed about 68 percent so far this year, as of Wednesday's market close. Investors have been returning to a stock that they had pushed below $1 by late 2012 as the drugstore chain cleaned up its balance sheet and closed underperforming stores. Rite Aid reported its sixth straight quarterly profit in April.

It operated 4,581 stores at the end of May, a total that trails only Walgreen Co. and CVS Caremark Corp.

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