Ceremony Assist crashes; CEO Heyward Donigan quotes Covid for cautious outlook

Heyward Donigan, CEO of Rite Aid, told CNBC on Thursday that she was “cautiously optimistic” that the US can avoid another round of stringent Covid restrictions despite the existence of the Delta variant.

“We all hope that enough people get vaccinated so that the variant doesn’t become so significant that our stores close again,” said Donigan in the “Squawk Box”.

Still, the CEO said the drugstore chain had been careful with its financial projections, in part because the impact the coronavirus pandemic had on business was unpredictable.

Rite Aid’s shares fell 14.5% Thursday, dragging the company’s market value below $ 1 billion as Wall Street digested mixed first quarter results and weaker earnings forecasts.

Rite Aid’s forecast for adjusted EBITDA – earnings before interest, taxes, depreciation, and amortization – was $ 440 million to $ 480 million for fiscal 2022, down from an estimate of $ 524 million, according to FactSet.

“We are very cautious because we missed last quarter due to the complete meltdown, I call it, from cough, cold, flu – both in the pharmacy and in the front end because there was just no cough, cold, flu,” said Donigan, alluding to the recent surprisingly calm flu season in the US and its impact on Rite Aid.

“We just didn’t know how far down, how vaporized this business would actually be. So when we look ahead, we think we need to be very careful and prudent in our forecast,” said Donigan, the former CEO of Pennsylvania- based Rite Aid since August 2019.

“We expect some improvement. We don’t expect a complete improvement,” added Donigan.

She also admitted, “It’s very difficult, it remains very difficult to predict, annual results in a retail pharmacy in the middle of a pandemic because we’re … still in the thick of it to some extent.”

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

Rite Aid’s outlook doesn’t take into account potential Covid vaccine boosters or vaccinations for children under 12, Donigan noted. Studies are currently underway to investigate the vaccine in children under the age of 12.

The Food and Drug Administration approved Pfizer’s Covid vaccine for use in children ages 12 to 15 a little over a month ago. Moderna, which also makes a two-dose vaccine, has asked the FDA to extend its approval for emergency use to adolescents 12-17 years of age.

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