Rite Aid (RAD) Q4 2022 Earnings Call Transcript

RAD earnings call for the period ending March 31, 2022.

RAD earnings call for the period ending March 31, 2022.

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Rite Aid ( RAD -3.60% )
Q4 2022 Earnings Call
Apr 14, 2022, 8:30 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning. My name is Rob, and I will be your conference operator today. At this time, I would like to welcome everyone to the Rite Aid Corporation fourth quarter fiscal year 2022 earnings conference call. [Operator instructions] Byron Purcell, investor relations, you may begin your conference.

Byron PurcellInvestor Relations

Thank you, Rob, and good morning, everyone. We welcome you to our fiscal 2022 fourth quarter earnings conference call. Heyward Donigan, president and chief executive officer; and Matt Schroeder, executive vice president and chief financial officer, will begin the call with prepared remarks. Andre Persaud, executive vice president and chief retail officer; and Chris DuPaul, chief operating officer of Elixir, will also join the call during the question-and-answer session.

As we mentioned in our release, we’re providing slides and related materials we’ll be discussing today. These slides are provided on our website, investors.riteaid.com. While management will not be speaking directly to the slides, these slides are meant to facilitate your review of the company’s results and to be used as a reference document following the call. Before we start, I’d like to remind you that today’s conference call includes certain forward-looking statements.

These forward-looking statements are presented in the context of certain risks and uncertainties that can cause actual results to differ. These risks and uncertainties are described in our press release in Item 1A of our most recent annual report on Form 10-K and other documents that we filed or furnished with the SEC. Also, we’ll be using certain non-GAAP measures in our release and in the accompanying slides. The definition of the non-GAAP measures, along with the reconciliation to the related GAAP measure are described in our press release and slides.

With that, let me turn the call over to Heyward. Heyward?

Heyward DoniganChief Executive Officer

Thanks, Byron, and good morning. Thanks for joining us and welcome to our fourth quarter earnings call. Fiscal ’22 was a strong year that exceeded our expectations. I’m so proud of the team, who successfully managed through the second year of a pandemic.

We made good strides in our retail pharmacy business despite some short-term challenges on the front end and turned the corner at Elixir, positioning ourselves for future growth. I’m really excited to talk to you today about our strategy for fiscal ’23 and beyond. But before I outline our growth plan for fiscal ’23, I’d like to talk briefly about our expectations for our business as we move beyond the height of the pandemic. As we all know, the past two years have been unprecedented, and companies like ours had to shift our focus and energy to help fight the pandemic and save lives.

And as COVID becomes a part of everyday life now, we’re eager to move forward to this new normal. It’s important to note that COVID’s impact on our business was not solely a tailwind. While we saw benefits from the pandemic-related services we provided, COVID also brought significant headwinds to our business. Those included supply chain pressures impacting our inventory and sales; store traffic shifting due to continued work from home, which especially impacts urban areas; and a tightening labor market.

But we were able to mitigate these impacts. All of these factors did put a strain on the business. Now, we’re seeing a reopening. And we’re expecting the following trends to positively impact Rite Aid.

As consumers reduce their masking or unmask completely and children go back to school, we’re seeing an increase in scripts and over-the-counter products related to cough, cold, and flu. The super spreaders remain the kids. We’re also seeing an increase in demand for maintenance scripts. In Q4, maintenance scripts are [Technical difficulty] last year and versus two years ago.

We are reviving our focus on ancillary vaccines. So, remember, when people were getting COVID vaccines, they couldn’t also get their ancillary vaccines. So, we are really back to business on numerous [Technical difficulty] and other important vaccines as consumers are catching up on their doses after the pandemic. And, of course, we continue to vaccinate and test for COVID, and we’re seeing an uptick in COVID anti-viral prescriptions like Paxlovid.

This becomes another tool that our pharmacy teams can use to help our customers. It’s also back-to-business at Elixir, with companies now willing and able to move to new PBM partners. And we already have close to a million members in the 2023 pipeline. Overall, the pandemic underscored the critical role that the pharmacist has within the U.S.

healthcare ecosystem with consumers, many for the first time, getting a vaccine from their pharmacists. We administered 14.3 million COVID vaccines and 3.6 million PCR tests just in FY ’22. Now, as we see pharmacists’ clinical scope expanding in many of the states in which we operate, we’re well-positioned to deepen our customer relations. In summary, passing the peak of COVID represents a positive inflection point for our business.

And we are excited to leverage what we learned, continue to be really nimble, and take advantage of the growth opportunities available to us. So, let me talk about our growth strategy. We are squarely focused on the business of pharmacy. We are a full-service pharmacy company that engages with consumers to help them access life-saving and life-enhancing prescription drugs.

The markets we’re in today include dispensing, pharmacy benefits administration, medication adherence, and clinical services. The total addressable market for our business is $1 trillion in annual revenue and is growing by 40 billion a year. And yet, despite the size and maturity of parts of this market, there are still systemic needs that aren’t being met. One in seven Americans live more than five miles from the nearest pharmacy, 29% of Americans fail to take their medications as prescribed because of the cost, and underutilization of medications drives $500 billion-plus a year in avoidable medical costs.

We believe that supporting these unmet needs presents a tremendous opportunity for us, and the price of entry for us is very low. Looking at the pharmacy services landscape today, the largest portion of the trillion-dollar market is pharmacy benefit management, followed by retail pharmacies. And yet, the greatest amount of innovation is coming from emerging start-ups who are focused on addressing shifting consumer needs. But while these start-ups have entered this business, many lack the assets, scale, and customers to meet the full needs of the pharmacy marketplace.

We have the assets to meet these needs at scale and win a greater share of this trillion-dollar market, including over 6,400 pharmacists; over 2,400 convenient retail pharmacy locations with home delivery capabilities; a national specialty pharmacy; a national mail-order pharmacy; a full-service PBM with scale flexibility and proven expertise; a best-in-class claim adjudication platform; a prescription discount card services platform; medication adherence; and clinical services from health dialog; and not to mention, the 35 million-plus customers and the relationships we already have across the retail and healthcare value chains. So, given our existing scale and broad range of assets and capabilities, we see three vectors to drive growth. Our first growth sector is focused on deepening our market share and growing our current businesses. How will we do this? It’s our mission to improve the health and wellness of our communities through engaging experiences that provide our customers with the best products, services, and advice to meet their unique needs.

Improving adherence and vaccination rates fulfills this mission while delivering meaningful, incremental scripts to our pharmacies. To achieve this, we have developed a portfolio of proprietary tools and programs proven to improve adherence and immunization rates. These analytics-backed tools and programs allow our pharmacists to identify and target and tailor engagement through in-store, but also telephonic and digital channels. As the unprecedented demand for vaccines and testing abates, this will actually enable our pharmacy teams to leverage these tools and programs to improve adherence.

This is important since an improvement in adherence of just 1% provides a $20 million gross profit benefit. With our focus on delivering a heightened digital experience, we expect to grow riteaid.com e-commerce sales and expect our buy online, pick up in-store offerings. Revenues from our third-party delivery and marketplace channels grew by over 50% in fiscal ’22, and we expect similar growth rates in fiscal 2023. We will roll out our newly designed own-brand portfolio products and grow sales.

We launched our new loyalty rewards program, Rite Aid Rewards, to activate incremental customers, and we will scale our new beauty assortment, which showed 10% year-over-year growth in our pilot location. And we will grow Elixir. We are on target to sell 300,000 new members for January 1, 2023. So, as you know, the first step to achieving net growth is retaining the business we already have.

After accounting for previously known losses due to health plan consolidations, we’re on track to retain 95% of our business for the 2023 selling season. And I’m excited to share that we recently renewed, in a very competitive situation, our largest Medicare Advantage client with a three-year contract. So, the next step is to win new business. And to do that, we have to first be competitive on price.

That’s the price of entry. We’re doing that through strong network pricing and our new rebate aggregator. Now, we’re getting to the finalist position on a regular basis where we are presenting a unique and compelling value proposition. Our results have shown that once we get to finalist, we are winning deals 35% of the time.

While we are very early in the selling season, better pricing, with a newly restructured sales team and a focus on our target market segments, has led us to sell 35,000 new members already. We have 150,000 lives in the current finalist stage for January 1, 2023, and a current pipeline of nearly a million members and growing. Our Elixir Savings cash discount business continues to grow both in EBITDA and revenue. And I’m very excited now that we are spending more time refocusing on Elixir Specialty, our specialty pharmacy.

We have identified meaningful EBITDA opportunities by improving our contracts, gaining access to more limited distribution drugs, and growing volume from PBM clients and other parties. As we have reported in the past, we are continuing to reposition our approach to the Elixir Insurance Part D business. We want to better manage the MLR of this business and reduce the cash burden. We also want to stabilize the EBITDA of a business that is under significant government reimbursement pressure.

Therefore, our bid for calendar year 2023 will result in a purposeful shrinkage of membership and, therefore, loss of revenue. As I noted earlier, we just renewed our largest Medicare Advantage client and have won a number of new Medicare Advantage health plans for 2023. Much of our success at Elixir has been in this growing healthcare segment and is a core competency that sets us apart. Our knowledge and expertise from managing our own Elixir Insurance business has positioned us as a leader in managing Medicare Advantage Plans, and we continue to be focused and committed to supporting the growth of those clients.

So, our second growth factor is expanding our offerings into new markets, including but not limited to extending our pharmacy footprint to improve access in underserved communities. Later this year, we will launch small-format stores with a focus on pharmacy, strategically located in markets where access to pharmacy is limited. We expect to achieve an IRR of over 25% on these stores. More to come on this exciting work.

Revitalizing health dialog to better serve the changing needs of our health plan clients is number two. Health Dialog has robust analytics and adherence and medication therapeutic management service offerings that are resonating in the market. In the last few months alone, we’ve won four new contracts that will serve over 800,000 lives, collaborating with consumer-oriented brands and retailers to develop new store-within-a-store partnerships. These creative partnerships will leverage our space to provide exciting new products and services to our customers in a working capital-efficient manner.

Excuse me. And then, our third avenue of growth is focused on creating new offerings that leverage our portfolio of scaled assets to meet the evolving needs of customers and organizations, including growing our current health plan business to improve outcomes by leveraging our in-store pharmacies to engage with their members. We currently have contracts with five health plans, with another dozen in the pipeline; also, continuing to provide [Technical difficulty] with access to our leading claim adjudication platform and adding other service offerings to these clients; and finally, establishing strategic partnerships with innovators to help them scale their access to our 35 million customer base. So, in addition to growth, we are continuously evaluating our business to ensure we’re optimizing our expense structure to drive maximum efficiency.

Our key optimization initiatives include reducing SG&A by $170 million this year, executing on additional store closures, and investing in improvements in our supply chain. So, in closing, we expect these various initiatives to enable us to grow our company over the next three years. As we look ahead to fiscal 2025, we project EBITDA growth of 10% to 20% from fiscal 2022 levels and a decrease of our leverage ratio from 5.4 to 4.5. I am so excited, and I hope you can sense that the entire writing team is really energized by what we’re seeing in our business and really ready to realize the potential of becoming a preeminent full-service pharmacy company.

Now, I’ll turn it over to Matt for some more commentary on the numbers for FY ’22.

Matt SchroederExecutive Vice President, Chief Financial Officer

Thanks, Heyward, and good morning, everyone. Fiscal 2022 was anything but business as usual as the pandemic continued to bring new challenges to our segments as we executed on our strategies. In the midst of this environment, we grew revenue, significantly improved adjusted EBITDA, and generated free cash flow, all while taking steps to stabilize and grow the company. We grew our fiscal ’22 EBITDA by $68 million, 16% over the prior year.

Our fiscal 2022 revenue grew $525 million, driven by a 12% increase in pharmacy sales. At Elixir, we entered into a comprehensive rebate aggregation agreement that has enabled us to expand gross margin and made us more competitive in the marketplace. We completed our integration of Bartell Drugs, solidifying our lead position in the important Seattle market. And we took the following steps to improve our capital structure.

We paid off the remaining $91 million of our 6% and 8% 2023 bonds using availability under our revolving credit facility. We amended and extended our credit facility through August of 2026. As a result of all of this extension, we have no debt maturing until July of 2025. As a result of our improved adjusted EBITDA and our success in extending our debt maturities, we received an upgrade to our corporate credit rating from both Moody’s and S&P.

And finally, through the generation of $245 million in free cash flow, we reduced our net debt by over $200 million in fiscal 2022 and ended the year with over $1.9 billion in liquidity and a leverage ratio of 5.4 times, which is an improvement of well over a turn from last yearend. Now, I’ll review our fourth quarter results in more detail. Revenues for the quarter were up $149 million or 2.5% from the prior year’s fourth quarter, driven by an increase in retail pharmacy segment revenues, offset by a decrease in PBM revenues. Fourth quarter net loss from continuing operations was $389.1 million or $7.18 per share compared to last year’s fourth quarter net loss from continuing operations of $18.5 million or $0.34 per share.

This increase is due to a current-year charge for impairment of goodwill related to Elixir and higher facility exit and impairment charges, driven by the company’s closed-store decisions. Additionally, during the quarter, the company reassessed its historical policy for estimating its allowance for manufacturer rebate receivables at Elixir and concluded that due to changes in business practices and other conditions, certain amounts within the outstanding receivable had an increased risk of noncollection. As a result, the company increased its allowance for manufacturer rebate receivables by $15.1 million, which is recorded as an increase to cost of revenues in the current period. This change in estimate is a nonrecurring item that is excluded from adjusted EBITDA.

Our adjusted EBITDA this quarter was $106.1 million compared to last year’s fourth quarter adjusted EBITDA of $41.3 million. Now let’s discuss the key drivers of operating results in our business segments. Retail pharmacy segment revenue for the quarter was $4.43 billion, which is $319 million higher than last year’s fourth quarter, driven largely by an increase in same-store sales. Retail pharmacy same-store sales increased 8.3% with same-store prescription comps up 8.7%.

We administered 3.3 million COVID vaccines in the fourth quarter of fiscal 2022 compared to 500,000 in last year’s fourth quarter. And as Heyward mentioned, outside of COVID, maintenance scripts were up 1% and acute scripts were up 9%. On a two-year stack basis, maintenance scripts were up 4.2% in Quarter 4, and acute scripts, excluding COVID vaccines, were down 7.3%. Front-end same-store sales, excluding cigarettes and tobacco products, increased 3.2%.

The increase in front-end same-store sales was driven by increases in upper respiratory, diagnostic, and seasonal products. These drivers were partially offset by supply chain issues and decreases in alcohol sales, which had a 300-basis-point negative impact on comps. We obtained access to same-day test kits during the fourth quarter and sold 2 million of them. We record most of the sales of these kits in the pharmacy instead of front end in order to enable our customers to easily access insurance coverage for these kits.

If we had recorded all of these sales in the front end, our front-end comps would have been approximately 300 basis points higher. Fourth quarter retail EBITDA — retail pharmacy adjusted EBITDA was $102.4 million compared to last year’s fourth quarter adjusted EBITDA of $6 million. The increase in adjusted EBITDA is attributed to higher pharmacy same-store sales; higher front-end same-store sales, as we cycled prior year’s cough, cold, and flu headwinds; and a reduction in markdowns offset by pharmacy reimbursement rate pressures. Retail pharmacy segment adjusted EBITDA SG&A expenses were $79.7 million higher than last year’s fourth quarter but flat as a percent of revenues.

This was due to higher pharmacy salaries to support COVID vaccination and testing, higher front-end salaries due to wage increases, the cycling of last year’s PTO changes, and higher self-insured medical and bonus expense. We do expect to see continued wage pressures due to market conditions, which is taken into account in our fiscal 2023 guidance. I’ll now shift to our pharmacy services segment, Elixir. For our fourth quarter, Elixir saw revenues decrease $176 million, or 9.4%, to $1.7 billion, due primarily to a planned decrease in Elixir Insurance membership and a previously announced client loss that was driven by industry consolidation.

Elixir’s fourth quarter adjusted EBITDA was $3.7 million versus last year’s fourth quarter adjusted EBITDA of $35.2 million. This was due to a decline in revenues, an increase in the medical loss ratio at Elixir Insurance, and a write-off of accounts receivable related to our decision to exit a line of business. Without the impact of the medical loss ratio adjustment and the receivable write-off, Elixir’s Q4 EBITDA would have been similar to what we achieved in the third quarter of fiscal 2022. Elixir SG&A for the fourth quarter improved due to cost reductions that we made to align our structure with the reduction in lives that incurred on January 1.

Now, let’s turn to guidance. As the pandemic continues to wane, we expect the financial benefit that we saw from COVID vaccines in the retail business to be significantly reduced. However, as Heyward outlined earlier in our call, we are seeing indications that our investment in our long-term strategy is beginning to bear fruit. We expect to grow core business revenues, improve margins, and will reduce our cost structure.

Adjusted EBITDA is expected to be between $460 million and $500 million. Adjusted EBITDA in the retail pharmacy segment is expected to be between $320 million and $350 million. While adjusted EBITDA at Elixir is expected to be between $140 million and $150 million. The following are some key assumptions that underlie our guidance range.

We do expect some contribution from COVID boosters, including demand for the second booster that we have seen over the past two weeks. We expect COVID vaccines to decline to levels of 20% to 30% of the levels we saw in fiscal 2022. We expect to see continued growth in comp sales and script growth in our core business after excluding the impact of COVID. We expect our loyalty card program changes and own-brand penetration initiatives to drive an incremental $30 million in gross profit dollars.

Our 145 store closures will drive an incremental EBITDA contribution of $60 million in fiscal 2023. Note that this number includes — the 145 includes the 63 that we disclosed at the end of our third quarter. And our efforts to drive corporate administrative efficiencies will yield a $40 million benefit. With these savings, plus additional opportunities in the field around store labor and efficiencies, we expect to drive a total of $145 million in retail pharmacy cost savings during the fiscal year.

Included in our guidance is an assumption that we will grow EBITDA at Elixir. We have taken steps to reduce SG&A at Elixir by $25 million due to the reduction in lives and tight expense management. And while our gross profit dollars at Elixir will be negatively impacted by a reduction in lives and revenue, we expect this impact to be offset by the increased rebate value from our rebate aggregation arrangement. Total revenues are expected to be between $23.1 billion and $23.5 billion.

The reduction from prior year is due to the impact of store closures and the reduction in lives at Elixir. Adjusted net loss per share is expected to be between $0.53 and $1.06 loss per share. Capital expenditures are expected to be approximately $250 million. In addition to regular maintenance spend, this includes important investments to grow our digital business, transform our member support systems at Elixir, modernize our distribution centers, refresh stores in a key market, and aggressively pursue prescription file purchases.

In addition, we are investing over $300 million in capital over the next three years to enhance our digital experience and to modernize the technology that powers our pharmacies, stores, and our PBM, driving efficiencies and productivity in our back office and significantly growing our digital business. Interest expense is projected to be approximately $200 million. This assumption assumes Fed rate increases of 150 basis points occurring over the fiscal year. We expect to generate a working capital benefit of $60 million from inventory reductions and to generate positive free cash flow to continue to pay down debt.

As we look long term, we expect to grow the Elixir membership and look to not only grow our core business but expand into some of the other exciting areas that Heyward discussed. We believe these initiatives can grow EBITDA by 10% to 20% over the fiscal ’22 levels by the end of fiscal 2025 and that we can reduce our leverage ratio to 4.5 times by the end of fiscal 2025. This completes our prepared remarks. Rob, please open the phone lines for questions.

Questions & Answers:

Operator

[Operator instructions] Your first question comes from the line of Lisa Gill from J.P. Morgan. Your line is open.

Michael MinchakJ.P. Morgan — Analyst

Hey, good morning. It’s actually Mike Minchak on for Lisa this morning. Thanks for taking the questions. So, first off, just given the COVID vaccines and testing has been one of the larger swing factors in your results over the last few quarters, and just based on a number of inbound questions we’ve gotten over the past, you know, few weeks or so, just wanted to see if you could provide some incremental color on the profit associated with vaccines and testing in order to just get a better sense for the performance of the underlying business.

I think you’ve given some color in the past around profit per COVID vaccine administered. So, just wanted to confirm that. And then, how should we think about, you know, the contribution from COVID tests, both in-store tests and OTC?

Heyward DoniganChief Executive Officer

So, it’s Heyward. Let me — hey, Mike. Let me just start by saying that we have actually reduced our assumptions around the volume of testing and COVID vaccines from our last discussion. And so, that is reflected in these numbers.

And then, I will — because I think it’s really important that we take the actions we need to get back to business and not assume that we’re getting the same, you know, level of vaccines. But Matt can speak to the process.

Matt SchroederExecutive Vice President, Chief Financial Officer

Sure. So, thanks, Mike, and good morning. Look, on the COVID vaccines, you know, I would say they had a — you know, they had an EBITDA, you know, contribution range in the $20 per vaccination range. On the testing side, you know, the PCR test was, you know, probably around the $10 to $15 per EBITDA contribution range.

Antigen tests are around $5. So, those are some numbers you can use from the standpoint your modeling.

Michael MinchakJ.P. Morgan — Analyst

Got it. That’s very helpful. And then, just over the course of the pandemic, it seemed like one of the more significant headwinds in your pharmacy business were lower acute script volumes. I guess, you know, you talked about the fact that those are largely higher-margin generics.

You know, I think you talked about in the quarter, acute scripts were down 9%, you know, although, you know, I guess, we’re comping against sort of a very weak cough, cold, flu in the prior year. I guess, I just wanted to get a sense to where acute volumes currently stand, you know, as compared to pre-pandemic levels and sort of what’s incorporated in the fiscal ’23 guidance. Do you assume a recovery to pre-pandemic levels there? And then, I guess, just as a follow-up more broadly, you know, how would you characterize the pharmacy reimbursement environment? Are you seeing — is that sort of consistent sort of year to year?

Matt SchroederExecutive Vice President, Chief Financial Officer

Thank you. So, maybe, I’ll jump in and start. So, first of all, just to be clear, we were up 9% in acute scripts in the fourth quarter, which, I think, is what you meant. But I may have heard you say down, so I just wanted to clarify that.

We are down over two years ago, you know, in kind of a two-year stack level, about 7%. You know, we’re expecting cough, cold, and flu, and other acute scripts to get back to kind of the pre-pandemic levels. And I would tell you, it’s very early, but in the first six weeks of this year, we are seeing some strong results in cough, cold, and flu scripts and also in OTC products as well. And the other thing we’re expecting that included in our guidance is, you know, flu immunizations over the last couple of years have been down from where they were pre-pandemic due to, I think, you know, immunization fatigue as the way I would talk about it.

And we expect those numbers to get back, you know, closer to our pre-pandemic levels, as well as people kind of step back from, you know, everything being all COVID and start thinking about, you know, getting immunized against other types of conditions. You know, on the reimbursement rate front, we’ve got really good line of sight into the contracts for fiscal 2023. And I would characterize, you know, the rate pressures as being there and probably consistent with what we’ve seen the last couple of years. You know, no movements up or down either way, you know, as far as that goes.

Michael MinchakJ.P. Morgan — Analyst

Got it. Appreciate the color. Thanks.

Matt SchroederExecutive Vice President, Chief Financial Officer

Thanks, Mike.

Operator

Your next question comes from the line of Evelyn Anderson from Evercore. Your line is open.

Elizabeth AndersonEvercore ISI — Analyst

Hi, guys. Thanks so much for the question. I just wanted to dig into the $170 million of cost initiative savings and make sure I understand where the relative buckets are coming from. I think you said $60 million from store closures and maybe $40 million from corporate expenses.

So, is that sort of implying that $70 million is the rebate aggregator benefit? I just want to make sure that I am thinking about all of those buckets correctly. So if you wouldn’t mind parsing that out, that would be super helpful.

Heyward DoniganChief Executive Officer

Well, the overall 170 is SG&A reduction, so it doesn’t have anything to do with the rebate aggregation. We are highly confident that we can achieve the 170 million, and we have already made significant inroads into that number. So, Matt, maybe you could just break it out?

Matt SchroederExecutive Vice President, Chief Financial Officer

Sure. So, here’s a bridge to 170. And good morning, Elizabeth. Closed stores is a $60 million benefit.

And that’s a net EBITDA benefit. So, you’re going to see, you know, kind of on a gross basis, an even larger reduction in SG&A costs with some reduction, you know, in gross profit dollars in revenue, which is why our revenue guidance — it’s one of the reasons our revenue guidance is lower this year. Forty million dollars are going to come from corporate administrative back-office costs. Another $45 million is going to come from a reduction in retail SG&A, and it’s a combination of store labor, control initiatives, as well as some sourcing, you know, and procurement initiatives around, you know, things like repair and maintenance, store supplies, and other type of expenses.

And then the other 25 is at Elixir and really cuts that we have already made as of January 1 to rightsize the business with some of the reduction in lives. So, you take those numbers and that adds up to the 170 in benefit.

Elizabeth AndersonEvercore ISI — Analyst

Got it. That’s super helpful. So, just maybe as a follow-up to that. Sorry about the rebar.

So, what is the benefit from — the net benefit to ’23 from the rebate aggregator change that you’re seeing right now?

Heyward DoniganChief Executive Officer

Yeah, I think that’s really squarely in the — thank you, Elizabeth. I think they said Evelyn. So —

Elizabeth AndersonEvercore ISI — Analyst

It’s OK.

Heyward DoniganChief Executive Officer

Sorry about that.

Elizabeth AndersonEvercore ISI — Analyst

Thank you.

Heyward DoniganChief Executive Officer

But we see the rebate aggregation benefit now and are very excited about putting this other stuff behind us on the Elixir side of the business. So, maybe you could —

Matt SchroederExecutive Vice President, Chief Financial Officer

Yeah. I don’t think we gave a specific number for the rebate aggregation benefit. But I would say — I would think about Elixir from the standpoint of on a gross profit dollar standpoint, we are going to see some gross profit dollar degradation from the loss in lives. And we see the rebate aggregation benefit more than offsetting that number and helping us kind of get that bridge to the 140 to 150 guidance.

Heyward DoniganChief Executive Officer

And it also — we pass a lot of that benefit through to our clients, and that’s how we become even more competitive than we were before. And then Matt’s speaking about the stuff that, you know, stays with us and helps us propel our business forward.

Elizabeth AndersonEvercore ISI — Analyst

Got it. And then, maybe, sorry, one last question on the SG&A labor side. You mentioned, obviously, that $45 million reduction in retail SG&A. I assume that maybe you need less staffing if you’re doing fewer vaccines.

But sort of maybe help us balance that versus some of the comments we’ve heard from your competitors and across the broader economy about wage costs going up and sort of help us balance out those two elements.

Matt SchroederExecutive Vice President, Chief Financial Officer

Yeah, let me provide a kind of clarifying comment, and then I’ll turn it over to Andre. So, when you think about the 170 there, initiatives that drive a 170 reduction, some of what goes against that number is an anticipated increase in just, you know, wage rate costs. Some of that being, you know, performance-based, some of that being market-based. That wage rate increase that we expect is about a $45 million headwind.

I’ll turn it over to Andre to give us some more color around just the environment.

Andre PersaudExecutive Vice President and Chief Retail Officer

Thanks, Matt. Good morning, Elizabeth. Let me address the comments and sort of question on the vaccines labor. You know, our labor pool for such is that we have the ability to complete the vaccines we project within the projected labor spend.

As Matt shared, we are projecting a significantly lower vaccine volume this year versus last year and, thus, a corresponding labor reduction there. To your question as far as the broader labor market, I think it’s a tale of two stories for us in our footprint. First is that, you know, we operate in collective bargaining agreements and in states where we’re very comparable on rates compared to others. And then in other states, we have made targeted strategic investments to keep our current associates and attract new associates.

And that’s all in our current guidance as Matt has shared. Separately and concurrently, we’ve started over the last two years meaningful work to make Rite Aid an employer of choice and building a career with Rite Aid at all levels. I would tell you, the work we’ve done on our store managers and technician training comes to light on that. And lastly, we’re using, you know, a much more robust recruiting platform to attract a much higher-quality candidate at the top of the funnel.

And then lastly, you know, on labor in general, just like everybody else within the retail industry, you know, we’ve seen an exit of workers in the industry, but we are very focused on reducing our turnover. And talent and staffing continues to be top of mind for the entire senior leadership team within the retail pharmacy business.

Elizabeth AndersonEvercore ISI — Analyst

Got it. Thank you very much.

Operator

Your next question comes from the line of George Hill from Scotiabank. Your line is open.

George HillScotiabank — Analyst

Good morning, guys. First, thanks, and I appreciate you taking my question. And it’s Deutsche Bank and not Scotiabank. I haven’t moved again, unless somebody’s told me.

I guess, Heyward, where I want to start was just — thanks for the sense of humor. Could you reiterate just your 2025 comments? I want to make sure that we all got that down. And I want to make sure that you didn’t misspeak when you said 2025 versus 2023. And then I guess if it was 2025, could you and Matt just kind of walk through what are the big assumptions that underline? I thought you said double-digit EBITDA growth visibility through fiscal ’25.

I want to make sure I heard you correctly.

Matt SchroederExecutive Vice President, Chief Financial Officer

Yeah. I’ll maybe jump and start on the numbers just to be clear. So, we had and EBITDA of 506 million that we closed, you know, this year out. And we think, over a three-year period, we can grow off that EBITDA base in a range of 10% to 20%.

So, that’s, you know, kind of our long-term target, if you will, George. And in the other long-term target we talked about was with that EBITDA growth and with the generation of free cash flow, you know, setting a target of 4.5 times leverage ratio by the end of fiscal ’25. So, think of those two numbers just kind of as reset, you know, three-year targets.

Heyward DoniganChief Executive Officer

Yeah. So, no, you did not mishear.

George HillScotiabank — Analyst

OK. So, that’s super helpful. And I guess, Matt, I would just ask you, can you kind of go one level down there? Like, what are the implications for script growth? What are the implications for reimbursement? How much of that is Elixir versus the core pharmacy business? Again, I mean, that’s a given. If you look at the trends of retail pharmacy over the last decade, I mean, that would be a dramatic kind of change in direction from what we’ve seen at a macro level.

I would just love any incremental color you can provide around that.

Heyward DoniganChief Executive Officer

Yeah, well, I would say it’s not just — retail pharmacy is not — is — we are going to show growth for sure, and it is a growing business as you can see. And we’re expecting strong results both in scripts and pharmacy. But it’s the other areas of the business that I would point to as other key growth opportunities that we had discussed in the script, which includes the PBM. And not just the PBM, but all of the other businesses within the PBM: so, specialty pharmacy; mail-order pharmacy; our own cash discount card services program; the Laker adjudication platform; PBM as a service; our health plan business; our health dialog business; new store formats and new markets, which we start this year and expect to expand as the rate of return continues to be more than 25%; as well as some of our new partnerships, whether it’s store-within-a-store opportunities or some of the new and exciting things that we’ve talked about both in my talking points and some that are to be announced.

So, think of it as this is really — you know, we think of this, again, as a full-service pharmacy business. We’ve only begun to tap the opportunities into the business that is beyond retail pharmacy.

George HillScotiabank — Analyst

No, that’s super helpful. And I’ll say, Matt and Heyward, I’ll keep going for a second here until you guys tell me to be quiet. I guess, when you think about the growth in a lot of those businesses in the PBM segment, can you talk about how much of that, the platform, already exists for and how much of that growth might require inorganic initiatives?

Heyward DoniganChief Executive Officer

Yeah, just to give you a ballpark sense, of the $250 million in capex, only about 25 million is tied to Elixir and all of the assets within Elixir. And so, as I said earlier, we do not need to throw a lot of money at these new opportunities. We already have the assets to — we’re up and running with all of these assets already. So, this is a very capital-light set of initiatives that we’re talking about.

And certainly, we’re going to continue to invest in these. But think of it, I think, in that context, which is, we already have the assets. Now, it’s about growing the business. And that’s what we’re so excited about because, you know, we’re just tired of talking about COVID all the time.

Back-to-business at all of the assets within Elixir, which include the PBM, but not just the PBM. We have a discount card services platform. We have the Laker adjudication platform that currently serves as an adjudication platform software as a service for other PBMs. We have the specialty pharmacy, which, of course, is the highest growth, most expensive type of drugs in this business.

We have a mail-order pharmacy that we think other smaller innovators would like to use as well. So, we also, of course, have the retail pharmacy business and help dialog, which we have completely turned around and is now growing.

Matt SchroederExecutive Vice President, Chief Financial Officer

George, I would jump in and say — the other thing I would say is one of the reasons I talked about our three-year capex plan in my script around what we’re going to invest in kind of digital and technology is I think there’s some really important investments that we are starting to make and continue to make in building out our digital capabilities in the retail business, and also strengthening the existing platforms we have at the PBM to really drive some of these additional services. And I think the last thing is probably all the color I can give on a three-year target is I think quite a bit of this growth we expect to come into PBM. Another piece of the growth that I think is going to be outsized from what it is today proportionally is the growth of our digital business. And that would include e-commerce, it would include third-party marketplace sites, it would include digitally and we’re — you know, delivery.

And we’re starting to put a lot more allocation of dollars proportionately toward that type of investment while still working on, you know, addressing the store base. But that’s where we see the growth drivers.

Heyward DoniganChief Executive Officer

Yeah. We grew 50% last year, and we expect it to grow —

Matt SchroederExecutive Vice President, Chief Financial Officer

Exactly.

Heyward DoniganChief Executive Officer

Same amount this year. And we just rolled out buy online, pick up in-store across.

Matt SchroederExecutive Vice President, Chief Financial Officer

Yup.

George HillScotiabank — Analyst

And then, Matt, I guess the last one I’ll throw at you for now and I will follow up is that, when you look at the $170 million cost savings initiative, as you look broadly across the business, how many more opportunities are rounds of shots of 170 are there given, you know, it’s a $27 billion business that we’re talking about? So, that number and the scale of the business isn’t necessarily a huge number. And I guess, how do you think about — like, what is the opportunity for future cost savings initiative? And how much of that future EBITDA growth should we think of as coming from business growth versus cost savings?

Heyward DoniganChief Executive Officer

Well, right now, I would say it’s largely coming outside of the 170 million from business growth. So, there is opportunity, I believe. I don’t just believe, I know. There is significant additional opportunity on efficiencies, especially in our PBM organization.

We are in the process of a project which we actually haven’t talked about yet because we just haven’t had the chance called Project Fusion. So, while we’ve already integrated all the backroom operations between Elixir’s organizations and Rite Aid, Elixir in and of itself is about 10 different organizations. And so, the opportunity to integrate the two different PBMs at Elixir and move them to the common instance of Laker and all of the surrounding technologies and all of the surrounding processes will provide significant additional efficiencies within Elixir. And then we also expect to continue to drive efficiencies at mail order, at specialty, and at retail pharmacy.

So, more to come on that.

Matt SchroederExecutive Vice President, Chief Financial Officer

And George, I would add on the other opportunity we have over this three-year timeframe on efficiencies, as we are doing a lot of work around modernizing our back office, accounting, finance reporting systems, which, as we complete that modernization, should drive, you know, a lot of cost efficiencies as well.

George HillScotiabank — Analyst

OK. I’ll hop back in the queue. Thank you for the color.

Matt SchroederExecutive Vice President, Chief Financial Officer

Thank you, George.

Operator

Your next question comes from the line of Jenna Giannelli from Goldman Sachs. Your line is open.

Jenna GiannelliGoldman Sachs — Analyst

Hi. Thanks so much for taking my question. My first one is kind of a clarification. I think there’s still maybe a little bit of confusion around this.

Matt, you mentioned the $20 of EBITDA benefit for vax last year. Is that an adjusted number? Just trying to think about the contribution to overall EBITDA last year. We did that on 14 million or so vaccines. That suggests about a $280 million of EBITDA of the 506 you did last year.

Is that the right way to think about it? Or is there some SG&A offset that we need to consider? Thanks so much.

Matt SchroederExecutive Vice President, Chief Financial Officer

Well, the $20 is an EBITDA contribution, so the gross profit dollars on a vaccine is actually higher than that. But, you know, as we’ve talked about throughout the year and as we’ve talked about on our SG&A, you know, variance explanations every quarter, there’s, you know significant amount of payroll cost, you know, that gets put to that. But the 286 is a net number. And, you know, that’s — you know, if you’re thinking about kind of bridging from last year to this year, that’s kind of the headwind that you start with from, you know, the vaccine.

The 280 is like your kind of headwind you start with from a vaccine reduction standpoint.

Jenna GiannelliGoldman Sachs — Analyst

OK. Perfect. That is super helpful. I appreciate you clarifying that.

And then just, you know, additionally, as you ramp up the store closures, I’m getting a $60 million EBITDA benefit. Can you just remind us of the cadence of your schedules at this point? How much more opportunity might there be for closures? And how much of the fleet at this point is cash flow positive?

Matt SchroederExecutive Vice President, Chief Financial Officer

Yeah.

Jenna GiannelliGoldman Sachs — Analyst

That would be super helpful. Thanks.

Matt SchroederExecutive Vice President, Chief Financial Officer

Let me start with one clarification. That 280 number is just the 14 times a 20. So, that’s kind of a starting point of the total vaccine contribution. But remember, we do expect vaccines at levels of 20% to 30% of the prior year numbers this year.

So, there is a number of vaccines that we will do. So, I think on a net — you know, on a net kind of headwind from COVID vaccines, you have to take both those numbers into account. So, I just want to clarify that for everybody who’s kind of penciling out their model math.

Jenna GiannelliGoldman Sachs — Analyst

Yes.

Matt SchroederExecutive Vice President, Chief Financial Officer

So, on the store closures, you know, I think the one — we have done a very comprehensive review over the last six months of our store fleet, literally store by store. And we’re at the point now where I think we have, you know, gone through what I would call the pruning of the fleet from the standpoint of a one-time kind of cash-up process review. We will continue to look at stores for opportunities. So, I wouldn’t say there’s not going to be more store closures and there’s not some additional opportunity.

But we’ve got a set of kind of underperforming stores that are now kind of on a watch list where we’re looking at monitoring conditions and improvements and —

Heyward DoniganChief Executive Officer

Andre?

Andre PersaudExecutive Vice President and Chief Retail Officer

Thank you. Good morning. You know, the 145 that we have decided to close, I mean, the reality is we looked at, you know, how those stores operated. And it was the right decision to close those stores.

Ongoing, as Matt shared, we have a very robust process in place on looking at our store performance store by store and are addressing poor-performing stores, particularly as stores come closer to the end of term on lease. So, the headline here is that we are keeping a very close eye on our store-by-store performance and ensuring that every store moving forward contributes to the profitability of the organization.

Heyward DoniganChief Executive Officer

Yeah. So think of the ones that we haven’t closed by June as being on the bubble and so, you know, largely cleaned up the ones that were obvious. And I think going forward, as Andre said, it’s really going to be a lot about the leases and the performance, you know, pickup on the stores under careful management.

Jenna GiannelliGoldman Sachs — Analyst

OK. Perfect. Thanks. And then just one final one, if I can.

It’s great that you said, you know, you guys expect to be free cash flow positive this year. It looks like there’s a bit of — a little bit of a working capital benefit in there supporting that as well. Should we think about that as largely a reduction of inventory? Or is there anything else in that source of cash that we should be thinking about? And that’s it. Thank you.

Matt SchroederExecutive Vice President, Chief Financial Officer

So the working capital benefit is definitely a reduction in inventory. I think we have opportunities in two places even with some of the inflationary headwinds that are in the business that could offset some of these opportunities. One is we do have an opportunity to reduce the amount of brand drugs in our stores. We’re taking a hard look at that.

The second opportunity is we are converting certain lines of business or goods on the front end to pay on scan, which is going to be a nice one-time inventory reduction as we as we go from holding that inventory to not holding that inventory. So, those are the drivers of working capital benefit.

Jenna GiannelliGoldman Sachs — Analyst

OK. Thanks again.

Matt SchroederExecutive Vice President, Chief Financial Officer

Thank you.

Heyward DoniganChief Executive Officer

Thanks.

Operator

Your next question comes from the line of William Reuter from Bank of America. Your line is open.

Bill ReuterBank of America Merrill Lynch — Analyst

Good morning. I just have two. So, it’s helpful what you’ve provided in terms of the net impact you expect from reduced COVID administration. Is there any way that you can think about the offsetting factors to help us bridge to your guidance in terms of, you know, EBITDA associated with cough and cold, or associated with increased flu immunizations, acute scripts? Can you provide any help there?

Matt SchroederExecutive Vice President, Chief Financial Officer

Yeah. I think, you know, we did lay out, you know, the pieces, Bill, of the expense reduction. And I think we laid out very specifically the $30 million in gross margin benefit from, you know, own brand and loyalty. I would say on the pharmacy side, there’s going to be an EBITDA impact from nonscript improvement.

I would say that’s going to largely be, you know, somewhat offset by rate pressures. You know, on the front end, you know if you think about kind of the opportunity from sales growth, there’s probably a number of about $40 million there that’s like a sales growth opportunity in the front end in addition to the numbers we talked about there. So, I think those with all the other items, you know, we went through, I think give you — will help you do the bridge from the, you know, from ’22 to ’23.

Bill ReuterBank of America Merrill Lynch — Analyst

OK. And then secondly, just following up on Jenna’s question, do you have a number that you have an expectation of in terms of working capital benefit this year versus, uh, based upon scan-based trading and inventory reductions?

Matt SchroederExecutive Vice President, Chief Financial Officer

It’s embedded in the overall $60 million of working capital benefit that we talked about.

Bill ReuterBank of America Merrill Lynch — Analyst

OK. I think I missed that number. All right. Thank you.

Matt SchroederExecutive Vice President, Chief Financial Officer

Sure. Thank you.

Operator

Your next question comes from the line of Karru Martinson from Jefferies. Your line is open.

Karru MartinsonJefferies — Analyst

With kids back to school and those little super spreaders, you know, what is a normalized cough and cold and flu season to you guys? When we think back to kind of pre-pandemic, you know, what’s the magnitude of what that would contribute to your bottom line?

Heyward DoniganChief Executive Officer

Yeah, you might recall that it kind of just fell through the floor about, not last quarter, but, you know, quarter, the fourth quarter of the prior year.

Karru MartinsonJefferies — Analyst

Mmm hmm.

Heyward DoniganChief Executive Officer

Obviously, that’s a big business for us. And these kids definitely keep us in business. And so, you know, Matt, you want to just talk about the magnitude, or Andre? Andre, why don’t you just hit it?

Andre PersaudExecutive Vice President and Chief Retail Officer

Good morning. You know, our Q4 upper respiratory or cough and cold front-end sales were up over 50% because last year, we did not have a cough and cold season. I would say while it was up 50%, it still was below what we would look at a couple of years ago as a record cough and cold season.

Heyward DoniganChief Executive Officer

And I think because they’re just reopening schools right now.

Andre PersaudExecutive Vice President and Chief Retail Officer

Correct.

Heyward DoniganChief Executive Officer

So, you know, a little bit of this, I think, is timing.

Karru MartinsonJefferies — Analyst

OK.

Andre PersaudExecutive Vice President and Chief Retail Officer

But we still see upside this year in our plan on cough and cold.

Karru MartinsonJefferies — Analyst

OK.

Matt SchroederExecutive Vice President, Chief Financial Officer

Yeah, I think to give a finer point on the cough and cold, at least on the scripts, you know, I would expect cough, cold, and flu scripts to be up, you know, at least $2 million — 2 million scripts over what we saw last year, Karru. So, that’s like — and those are pretty profitable scripts for us. So, that’s, you know, I think a good benchmark to think about.

Heyward DoniganChief Executive Officer

So, I think it’s way up, but it hasn’t reached the levels that we think it could reach. And so —

Matt SchroederExecutive Vice President, Chief Financial Officer

Right,

Heyward DoniganChief Executive Officer

You know, so is allergy.

Matt SchroederExecutive Vice President, Chief Financial Officer

Yeah.

Karru MartinsonJefferies — Analyst

OK. So, some tailwinds there. And when we look at kind of the normalization or learning to live with COVID, you know, what are you seeing on the traffic trends as people come back to work? Are you seeing that traffic and basket start to pick up?

Andre PersaudExecutive Vice President and Chief Retail Officer

Yes. You know, I think I’ll share this, Karru, is that we are seeing uptick on traffic and basket in urban centers where people are returning to work. The flip side of that is the return to work has been a lot more cautious than one would have expected. So, when you look at traffic over two years ago in those certain stores, we’re still down.

But it’s encouraging year over year, significantly up over last year at this point in time in those markets.

Heyward DoniganChief Executive Officer

Yeah. One of the things that we considered when we did the store closures was that we don’t believe that people will go back to the office full time ever. And so, some of these urban markets that were tied to big office complexes, that was a consideration for us as well.

Karru MartinsonJefferies — Analyst

OK. In terms of the selling season for the PBM, I mean, we’ve been kind of static for two years. You know, what are the expectations for — I guess this will be for calendar 2023, fiscal ’24, of that selling season opening up at the end of this year?

Heyward DoniganChief Executive Officer

Well, as I said, we are very early in the 2023 season for employer business. And we’re in the 2024 season for health plan business. So, health plans have a longer lead time for implementation. So, just in the past few months, we’ve sold 35,000 new members and have barely gotten started.

And that’s against a total of 55,000 new members the prior year. Our pipeline is almost a million dollars — I’m sorry, a million members right now, and that is growing on a weekly basis. We’re in the finals for 150,000 additional members right now as we speak. And as I mentioned earlier, we’re closing 35% of the business when we’re in the finals position.

And the sales season really doesn’t really start to heat up until around the July August timeframe. And then, employers make decisions, you know, generally as late into the November timeframe. The health plan cycle is just getting started. That pipeline will grow during 2023.

And that business will largely go — not all, but largely go into effect in ’24. So early days, but I think very compelling and exciting stats so far.

Karru MartinsonJefferies — Analyst

Thank you very much, guys. Appreciate it.

Operator

And we have time for one more question. Your final question comes from the line of Carla Casella from J.P. Morgan. Your line is open.

Carla CasellaJ.P. Morgan — Analyst

Thank you. Well, I’m glad I squeezed in. A couple of follow-up. The capex guidance, 250, does that include file buys? And can you talk about that file buy market and what you’re seeing there?

Heyward DoniganChief Executive Officer

Yeah.

Matt SchroederExecutive Vice President, Chief Financial Officer

Yes. Carla, good morning. It does include file buys, probably about $35 million to $40 million worth of file buys is what we’re planning for next year. I would say the market is still robust.

Obviously, depends on kind of what area you’re looking at. But, you know, as we’ve talked about in past calls, there’s a lot of churn in the pharmacy business, especially around, you know, the independent level. And there are some, I think, other players, you know, whether it’s supermarkets or other players that, you know, are making or thinking about whether or not they want to be in the pharmacy business. And that’s, you know, I think, providing a lot of what I would call kind of deal flow, you know, and ability for us to take advantage of that.

Carla CasellaJ.P. Morgan — Analyst

Okay. And then did you say how many remodels you plan to do this year? I may have missed that.

Matt SchroederExecutive Vice President, Chief Financial Officer

We didn’t give a specific number. I would tell you, it’s going to be probably a lower number than we’ve targeted in prior years. We’re going to be focusing what I would call our store capex efforts on, you know, focused remodels in one of our key markets. And there are going to be remodels that I think are, you know, at a level of, you know, really refreshing and cleaning up the stores as opposed to an extensive remodel.

And then the other store capex side and that we’re really going to focus on this year is the platform that we talked about with launching, you know, some smaller-format pharmacy-focused stores, you know, in some contiguous markets to us.

Carla CasellaJ.P. Morgan — Analyst

OK. And did you — on the timing, so you’re closing 145. Did you say the timing and also how many you would be opening of the smaller format?

Matt SchroederExecutive Vice President, Chief Financial Officer

So, smaller formats yet to be determined. Certainly, a relatively small number this year. But, you know, we’re still working through the exact number. The 145 timing, we should have most of those closed by the end of June.

And probably at this point as we speak today, more of them are closed already.

Carla CasellaJ.P. Morgan — Analyst

OK. And then just one last follow-up on the PBM, Elixir. So, you know, the margins on that business on a gross margin basis, this quarter was — I’m assuming that included a big piece of that charge. But I mean, what’s a normalized gross margin on that? I think we’ve seen it as high as kind of the high 7%, 8% range.

Could it get back there? Could it go higher than that given the kind of businesses you’re selling? Or could it — would it be lower just because that you’re using — because you’ve consolidated the purchasing on the pricing on the — with Prime?

Matt SchroederExecutive Vice President, Chief Financial Officer

So, on a gross margin level, I think we expect it to get to 7% to 8% next year on a gross margin level. We expect for fiscal 2023, as we had kind of a scale back in lives, we expect the revenue dollars to go down but actually the gross margin rate to improve. And the improvement is tied into this rebate aggregation agreement and the ability to drive, you know, some of those additional rebate dollars into the margin line.

Carla CasellaJ.P. Morgan — Analyst

OK. Great. Thank you so much.

Matt SchroederExecutive Vice President, Chief Financial Officer

Thank you, Carla.

Operator

And that concludes our question-and-answer period. I will turn the call back over to Heyward Donigan for some closing remarks.

Heyward DoniganChief Executive Officer

Thanks, everyone, for your questions. And of course, I can’t say this enough. I’m incredibly proud of our over 50,000 associates, who again delivered a strong result in the midst of a really challenging year that required our team to be super fast, flexible, and innovative. And we’re really excited to turn the page on COVID and get back to executing on the strategy I outlined earlier in the call.

We have an extremely talented workforce, a clear strategy, and a set of assets today that we are ready to leverage and grow. And we’re equipped to capitalize on the tailwinds COVID brought us and get past the headwinds we’ve experienced over the past two years. So, we’re energized, laser-focused, and entering the next evolution of our company. Thank you, and be well.

Operator

[Operator signoff]

Duration: 63 minutes

Call participants:

Byron PurcellInvestor Relations

Heyward DoniganChief Executive Officer

Matt SchroederExecutive Vice President, Chief Financial Officer

Michael MinchakJ.P. Morgan — Analyst

Elizabeth AndersonEvercore ISI — Analyst

Andre PersaudExecutive Vice President and Chief Retail Officer

George HillScotiabank — Analyst

Jenna GiannelliGoldman Sachs — Analyst

Bill ReuterBank of America Merrill Lynch — Analyst

Karru MartinsonJefferies — Analyst

Carla CasellaJ.P. Morgan — Analyst

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