Rite Aid Says Not to Rely on Its Oct. Forecasts

Rite Aid Corp., the No. 3 U.S. drugstore chain, warned analysts and investors not to rely on forecasts for profit and cash flow it made last month, sending its stock tumbling by a third.

The forecasts were made Oct. 11 by Martin Grass, who quit one week later as chairman and chief executive. Rite Aid shares fell $2.56 to $5.38 before trading was halted on the New York Stock Exchange.

The warning is the latest stumble by Rite Aid, which has struggled to integrate purchases, twice warned it would restate three years of results and was sued by Florida for overcharging customers. Its shares have fallen 89% this year, the biggest drop in the Standard & Poor’s 500-stock index.

The Camp Hill, Pa.-based company confirmed it has been contacted by the enforcement arm of the Securities and Exchange Commission. The inquiry was earlier reported by the Wall Street Journal.

The retailer also canceled a conference call for Wednesday expected to discuss fiscal second-quarter results announced last week. Management needed more time to analyze the reasons why Rite Aid’s results were restated in a quarterly filing, said spokeswoman Karen Rugen.

Rite Aid’s stock has fallen from a high of $51.13 in January, slashing $11.8 billion from its value.

During last month’s call, Grass forecast earnings before interest, taxes and amortization of $1.01 billion this year, based on lower capital expenditures and fewer openings of stores. He also projected cash flow of $1.27 billion and $1.46 billion, respectively, in the next two years.

The company now “is not comfortable with any financial guidance given Oct. 11,” Rugen said.

“It’s the tip of the iceberg in terms of understanding the depth of the accounting issues,” said analyst James Kumpel at Raymond James Financial, who rates the shares “neutral.” “It raises that much more uncertainty.”

The caution follows two moves that investors expected would bolster the company’s finances: a $300- million investment by Los Angeles-based Leonard Green & Partners and amendments on $2.7 billion in loans that gave it more time to repay the debt.