Band-Aid for Rite Aid

Rite Aid Corp. (Camp Hill, Pa.), embroiled in an investigation of past accounting practices, announced a slight profit for the fiscal first quarter ending May 31, 2002. It was the first time the company has made money in at least four years.

However, the profit didn't come from improved store performances, it came through taxes returned to the company that it had paid a few years back, when it had reported positive net income. (Restatements of earnings because of accounting irregularities later turned those profits into losses.)

Rite Aid chairman and ceo Robert Miller said the drugstore chain expects to report net losses in the second and third quarters of this fiscal year, but “could return to profitability” in the fourth quarter.

The retailer did report a same-store sales increase of 8.3 percent in the first quarter, and said it expects same-store sales to be up 7 to 8 percent in the second quarter ending Aug. 31, 2002.

The company is under criminal investigation by the U.S. attorney's office in Harrisburg, Pa., for inflating profits by more than $1 billion over a two-year period. Three former Rite Aid executives, including former ceo Martin Grass, have been indicted. Last week, Rite Aid settled similar civil matters with the Securities and Exchange Commission, without having to pay a fine.