Rite Aid Corporation (NYSE:RAD), the third largest drug store chain in the country, reported a 55% drop in profits for its first quarter fiscal 2014 due to higher-than-expected drug costs and reimbursement rate reductions. Following the release of its financial results today, the company’s stock price declined more than 3% to $7.17 per share at the time of this writing around 2:02 p.m. in New York.

Rite Aid Corporation

Rite Aid’s financial results

For the quarter that ended March 31, Rite Aid Corporation (NYSE:RAD) generated $41.4 million in net income or 4 cents in earnings per diluted share and $6.5 billion in revenue, up 2.7% due to an increase in pharmacy same store sales. The drug store chain operator said its adjusted EBITDA was $282.6 million or 4.4% of its revenues.

Wall Street analysts expected the company to generate earnings of 4 cents per share on $6.44 billion in revenues. The drug store chain operator’s earnings meet the expectations of analysts, while its revenues were slightly higher than their estimate. During the same period a year ago, Rite Aid Corporation (NYSE:RAD) recorded $89.7 million in net income or 9 cents in earnings per diluted share on $6.3 billion in revenue.

According to Rite Aid Corporation (NYSE:RAD), its same store sales for the quarter rose 3.1%. Its front-end same store sales were flat, while pharmacy same store sales climbed 4.6%. Its pharmacy sales included a negative impact of approximately 143 basis points from generic introductions. The drug store chain operator said the number of prescriptions filled in the same stores rose 2.3% during the quarter, Its prescription sales represented 68.4% of total drug store sales, and its third-party revenue accounted forv97.4% of pharmacy sales.

In a statement, John Standley, CEO of Rite Aid Corporation (NYSE:RAD), said, “As we work through managing the higher-than-expected drug costs and reimbursement rate pressure that affected our financial results for the quarter, we remain focused on executing our strategy to expand our health care offering and transform Rite Aid into a growing retail health care company.”

Rite Aid Corporation (NYSE:RAD) relocated three stores, remodeled 105 stores, expanded one store, acquired one store and closed seven stores. Overall, the company had 4,581 stores at the end of the quarter.

Fiscal 2015 outlook

Rite Aid Corporation (NYSE:RAD) reaffirmed its fiscal 2015 guidance. The company expects to generate sales in the range of $16 billion to $26.5 billion, adjusted EBITDA of between $1.275 billion and $1.35 billion, and net income of between $298 million and $408 million, or 30 cents to 40 cents in earnings per diluted share.  Its capital expenditures are expected to be around $525 million.