A man walks out of a New York drugstore with a bag full of stolen goods in broad daylight.
Rite Aid signaled a very difficult quarter on Thursday when the drugstore chain announced a much larger than expected loss, sending shares down 28% during the session.
The loss was related to costs associated with its plan to close stores.
Some of those closings have affected stores in New York, where the retailer has been the victim of crime, particularly shoplifting.
Andre Persaud, retail director of Rite Aid, addressed the issue during the company’s earnings call on Thursday, saying it was nigh impossible to stop stealing from New York stores.
NYC RITE AID TARGET BY SHOPLIFTERS CLOSES, WITH ANOTHER SET TO CLOSED SHORTLY LATER
A door is used to lock items in a pharmacy and convenience store in New York. (Photo by Spencer Platt/Getty Images/Getty Images)
“I think the headline here is that the environment we operate in, particularly in New York, is not conducive to shrink reduction based on everything you read and see on the media. social and city news,” he said.
Shrink, is a term used by retailers to describe theft.
The drugstore chain said initial gross profit was impacted by a $5 million increase in shrinkage, particularly in urban areas.
A person walks outside the Rite Aid pharmacy in New York. (Photo by Noam Galai/Getty Images) (Noam Galai/Getty Images/Getty Images)
Overall, Rite Aid posted a net loss for the quarter of $331.3 million, or $6.07 per share, compared to a net loss of $100.3 million, or $1.86 per share one year earlier.
The loss included a $252.2 million goodwill charge related to its pharmaceutical services business. When removing one-time items, adjusted losses were 63 cents per share. Analysts polled by FactSet had expected an adjusted loss per share of 50 cents.
RITE AID REFUSES CLAIMS THAT NYC SHOP CLOSURES ARE LEADING TO JOB LOSS AMID HIGHLY PROFILE THEFT IN NYC
Earlier this year, the chain closed stores in New York’s Hell’s Kitchen neighborhood and another on Manhattan’s Upper West Side.
In January, a New York Post reporter spotted a brazen shoplifting incident at the Hell’s Kitchen site, where “store sources” told the outlet that people stole more than $200,000 in store merchandise in a matter of months.
Heyward Donigan, President and CEO of Rite Aid (Getty/iStock)
At the Upper West Side location, actor and comedian Michael Rapaport said he was at the store in January when he saw a man loading two bags full of allegedly stolen goods. Rapaport captured video footage showing the alleged thief walking past a store security guard as he exited the front doors holding the loot bags.
MICHAEL RAPAPORT RETURNS TO NYC RITE AID WHERE HE FILMED AN ALLEGED SHOPLIFTER
A spokesperson for Rite Aid previously told FOX Business that stores were closing “for a number of reasons” based on months-long reviews that were conducted “across the entire 2,500 store footprint.”
In total, the store closure plan meant the closure of 63 stores nationwide, or about 2% of the total number of Rite Aid locations.
Persaud added that the retailer is making progress in the fight against thieves.
| Teleprinter | Security | Last | To change | To change % |
|---|---|---|---|---|
| GDR | RITE AID CORP. | 5.05 | -2.00 | -28.37% |
“Over the past 24 months, the team has done an incredible job of improving our product protection, improving our organized retail program,” he noted.
Yet the theft also complicates the inflationary environment, the retailer warned.
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“We experienced some unexpected headwinds this quarter due to front-end contraction, particularly in our urban New York stores. Given the current economic environment, we expect to see a cautious consumer over the course of the second half of the year,” CEO Heyward Donigan said.
Stephanie Pagones of FOX Business contributed to this report.
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