Rite Aid (NYSE:RAD) turned in disappointing fourth quarter earnings. The drugstore chain posted poorer results than expected, with both an earnings miss and a loss. The company also totaled a loss for its fiscal year 2010.

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Losing Streak Continues
The quarterly loss was Rite Aid's 11th consecutive one. Revenue was off by 3.6%, to $6.46 billion from $6.7 billion - a loss of $208.4 million, or 24 cents a share. Last year's quarter, which included hefty write-downs of its Brooks-Eckerd chains which were purchased in 2007, were the major portion of the $2.29 billion, $2.69 per share quarterly loss. The Brooks-Eckerd purchase has weighed Rite Aid down with debt it is still having difficulty getting out from under.

The fiscal year 2010 numbers look like the quarterly numbers, only larger. Revenues were down slightly, to $25.67 billion from $26.29 billion, while the company posted a loss of $515.6 million compared to its 2009 loss, due to the previously mentioned write-downs of $2.94 billion. EPS for 2010 was a loss of 59 cents versus a loss of $3.49 in 2009.

Competitive Pressures
Beyond working through the debt from the Brooks-Eckerd purchase and trying to integrate those stores into the fold, Rite Aid is having a hard time matching up against Walgreen (NYSE:WAG) and CVS Caremark (NYSE:CVS). Walgreen, despite posting a recent earnings miss, is still showing bullish growth and strong fundamentals. CVS, which had a large misstep with its Pharmacy Benefit Management business, has recovered from that and has gathered steam again. Both these companies are stronger than Rite Aid and are also positioned to be viable no matter how health care reform impacts drugstore chains.

Competitive pressures are not limited to within the drugstore space only. Companies such as Pharmerica (NYSE:PMC), which operates institutional pharmacies in hospitals and nursing homes, are part of the field. Pharmerica's latest earnings report reflects the tight competitive arena, as it had lower revenue but squeezed out profits in spite of that. Add to this the supermarket-wholesale club stores, such as Costco (Nasdaq:COST), who have thriving pharmacies as well, and you have a difficult minefield for a weakened member of the drugstore herd like Rite Aid to run in.

Rite Aid's Prospects
With the stock trading at $1.49, it tells you what the market thinks. Rite Aid's significant debt load of still more than $6 billion is a deep concern. A glance at the balance sheet shows negative equity. The forecast for 2011 for the company is not optimistic. Sales are expected to be roughly flat, as the company is fighting to hold onto the same store sales it has.

This doesn't mean that the company will necessarily fail. Rite Aid has been working to reduce and refinance its debt, and has instituted programs for increasing sales along with closing some stores. It has narrowed its losses, yet the company obviously needs to accelerate that and see some profits soon. Whether Rite Aid can accomplish all this in a still-weak economy is a tough question. (For more stock analysis, take a look at America's Top Dividend-Paying Stocks)

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