Q1 2021 Rite Aid Corp Earnings Call
[music].
Ladies and gentlemen, thank you for standing by and welcome to 21 Q1 earnings comp.
Lets call at this time all participants are in the listen only mode. There will be a question and answers that.
Shifting to ask a question during on your telephone.
Require any further assistance please press.
Star Zero I would now like to handle Byron Purcell. Thank you. Please go ahead.
Good morning, everyone welcome either.
Fiscal 2021 first quarter, all with me today, our hey were down again.
Jim Peterson Chief operating officer.
Luxor and met Schroeder Chief.
Oh, Hey, we will provide introductory comments because.
Jim will provide an update on the retail business, Dan will provide an update.
And the pharmacy services business that will provide an update on our first quarter results and then we will take questions being slides related to the material will be discussing today. These slides are provided on our website www rite aid dot com, but at the investor with.
Missions information tab.
I hope you find them helpful. I say summarize some of that.
Key points made on the call.
Before we start I'd like to remind you that todays statements. These forward looking statements.
They are presented in the context of certain risks and uncertainties that can cause actual results to differ.
These risks and uncertainty.
Report on form 10-K, another documents have we filed or furnished to the extreme securities and exchange Commission using certain non-GAAP measures in early.
Our accompanying slides.
Along with the reconciliations through.
But it got measure are described in our press release and the slides, but these remarks.
Thanks, Byron and thanks, everyone for joining us entities.
Well the quarter like no other they need associates and that community.
By the unprecedented challenges.
'cause it's 19, I mean, if I'm rounding are crucial dialogue about diversity and rate racial cats.
First I couldn't be more proud of how are writing team has responded to these challenges.
Yeah, that's surrounding the data.
Britain conversations within our organization.
Makes sense about how we couldn't be better could be a part of the solution in our local communities.
Meanwhile, our team spent on the front lines of health care during the cold that 19 crisis.
Going up every day to fulfill our purpose is serving our communities during the time that great needs, including the expansion of Coca testing to 97 doors.
Oh the.
It's strategies that will position us to serve our communities at an even higher level.
In my eyes. Although this work is far from however, our team is more than passing this test and it gives me great confidence that we can continue to fulfill our important role in health care elevate our role golf.
Oh positive change in our communities.
In terms of the results for Q1, Coke 19 was the headline and the crisis impacted our business in a number of unprecedented ways.
First in our retail pharmacies, we experienced very favorable results as customers can visit our stores for advanced maintenance medications, Andy central item.
Basket size was up significantly.
And Phil is an art of level with the only.
All of our stores open with all of our usual hours quickly implemented needed safe.
Piping, losing and show.
With possible and we know that it was a challenge.
As a result, and Jim will speak to this later front end sales exclude.
For SAP.
We all.
Share from our competitors during this time.
And.
[laughter] activity.
As the quarter went on we began.
'cause see a significant the Clos as doctors offices close an elective surgery for post holiday.
Creep costs necessary.
And making essential and critical investments to keep our.
So theater and our customers say count the increase in front end sales.
The reduction in acute script.
It's a co that 19 had a 30 million dollar and that night.
Yeah, the impact on adjusted EPS.
So now turning.
I'm pleased to announce that we've completed the recruiting and hiring of our entire new leaders kept team and envision Rx up.
Options, which is soon to be renamed Elixir.
Our new team includes just the right competition Rx options leader.
With extensive organization off to bring a fresh perspective.
Along with strong pharmacy services market expertise and delivered strong results under challenging circumstances Inc. Q1.
Revenue was up significantly over prior year.
Primarily trip.
EBITDA grew 18 million from increased gross.
Profit related to improvements in pharmacy network man, it's supposed to on top of RF.
Hertz to rebuild this organization of the new brands.
Yes.
Integration of our assets within and between Elixir and Rite aid all of which is a result.
Okay, and strong synergies for sales team and our news.
To digital experiences, which will be rolled out this fall hey, Dave even with all of this change.
With strong growth in.
Both segments and we delivered adjusted EBITDA from kitchen.
Anyway operations of 107.4 million comparisons in the prior year period.
I am encouraged by these results and I remain bullish about our future walkover does create uncertainty the fundamentals of our business was for a long before the crisis and I believe we are now even better prepared than many to emerge from cove and in a positive way.
Our team is doing an excellent operational excellence.
In fact, because of its great work, we remain on schedule with the execution of our bold new Rx evolution strategy.
Through this strategy, we are committed to read.
Defining our industry wide PBM.
Unlocking.
And the value of our pharmacists and revitalizing our retail.
We're also committed to.
Being a destination for hold being health, where traditional medicine neat alternative remedies to support body and fear it.
We are dialed in on needs.
In the needs of our new target consumer millennial and Gen X what he generational household.
Including children's parents and <unk>.
Yes.
It's an approach I call buy one get type for drive and influence that the purchase.
[noise] St habit of all those they care for.
We have seen a modest increase in the precise.
About front end sales third part treatable to this new growth targets Chopra, which is really encouraging given that we're in the beginning stages of our re merchandising initiatives and have not yet launched aren't in France.
The coated crisis has proven just how east central pharmacy start to the communities, we serve and the important role pharmacists have in providing care at the top of their license.
In the case of co then we are administering testing.
We're focused on elevating the walls of our pharmacists and freeing up time, they're precious time to provide levels of consumer engagement never before seen in health care.
And all of the is being supported by our new merchandising and on an exciting new brands.
As of this call we have completed 25 or exterior facades updates with our new logo, our news sites and a fresh new look and we're on track to implement our new merchandising in concert with our brand launch this fall and as a reminder, by the end of this year all of our.
Our store exteriors will be completely redone and.
In addition.
And on top of this with strong liquidity expects to generate free cash flow. This year and continue taking critical steps to address our debt maturities as reflected by our bond exchange announced this morning.
And we continue doubling down on areas, where we have momentum shifting resources to invest in key growth opportunities, while reducing corporate expenses and realizing synergies through integration activity at all its or.
Oh whole new Rite aid is coming to life and we're excited about our vision for the teacher and the important progress were making.
At the same time, hi, the passion and spirit of our more than 50000 associates, who have come to work every day to serve our customers on clients and demonstrate the crucial role that pharmacy plays on the front lines of health care.
So with that I'd like to introduce computers.
It's gonna give you some additional updates on our Q1 performance and the exciting Ah details about our strategic progress on the retail pharmacy side Jim.
Thank you Hayward.
[noise] as Hayward mentioned, our team was challenging unprecedented ways during the first quarter I.
Hi, I'm, so proud of our associates remarkable response to unfathomable situations bravely bravely tirelessly, serving our communities amidst the uncertainties in perils of little pandemic Incivek unrest, all while pushing forward to deploy the Rx evolution strategy.
To me this quarter proved that we can execute at the highest level and signal that decisiveness and nimbleness, we'll continue to emerge as competitive advantages for us typically developing and implementing.
New procedures to keep our stores safe and Santa toward Terry collaborate supply chain to stay in stock.
Maintaining store hours wherever possible and managing E commerce demand that peaked at over 10 times historical levels.
And while we realize there's much more important work to do and turning our company around I'm more confident than ever before that we can and will achieve our vision of becoming beat destination for whole being held and a growing differentiated driving organization.
In terms of the quarter to cope with 19 prices put our pharmacy business in unchartered territory.
With all the factors that he would mentioned earlier, we were able to grow same store prescription count by 40 basis points. In this came despite a nearly 15% reduction in acute prescriptions.
Well, it's simply too early to tell if these trends will hold would be uncertainty surrounding cobot 19, we're beginning to see some positive trends as additional parts of the country continue to reopens.
A key area of success with the growth of our prescription delivery business first during the quarter as we began providing.
The result, prescription deliveries increased 86% in Q1 compared to our baseline and we look forward to continuing to leverage this or.
Chris to meet the needs of our customers.
Immunization rates dropped during the quarter.
Not surprisingly as the CDC issued guidance to defer adult immunizations to minimize exposure to cobot.
The CDC is recently updated its guidance to resume immunizations. According to its immunization schedule put immunization practices and we have directed our field leadership in stores robust protocols.
In our customers protect themselves from the flu once the vaccine hits the Mark.
Good later this summer.
Back to track towards stores we.
Drove heightened engagement with customers at home through clinical services like many customers were more willing to.
You engage with their trusted righted pharmacists and we in fact Expiries three inch three record weeks for him.
I spoke earlier about strong execution and nowhere was that more apparent than our rapid and.
Seven kobin testing sites at Rite aid stores.
Through apart.
The human services, we now have the capacity to conduct more than 48000 tests each week to help our customers.
He evolving rule our pharmacist can.
Play as clinical extensions of our cause radio pharmacy has continued to prove they are fully prepared and capable of it.
Expanding their role in ways that healthy health care stakeholders.
As you know pharmacy.
Which is designed to fundamentally change.
As I've mentioned before.
Schumer's visit Rite aid stores up to 30, there's a significant opportunity do.
Actions to activate and engage consumers in their own help and support health plans and health care.
On the front line in the communities they serve.
We believe rite aid will place.
Guide consumers decisions in between doctors' visits and serve as a conduit to better help out.
Moving forward, we will continue to him.
Below these that supports a connected.
Health solutions that include prescriptions.
You know retail bid.
In same store sales, increasing by 16% when excluding tobacco items.
This growth was driven by general cleaning products Sanitizers wipes.
Paper products over the counter frontal items.
In addition own brand penetration increased to 19.56% an increase of 119 basis points as we continue efforts to launch additional full being health.
We're also seeing strong.
And items do the Amazon marketplace, which we feel is a testament to the quality of the products.
And the demand of the marketplace.
Team drove some notable gains in front end market share as our associates work passionately to serve our customers during the covert 19 prices.
According to IRI Reid.
Before its which exclude tobacco cigarettes inbreeding cards.
Our in store front end retail sales and unit market share increased by 270 basis points within the drug store channel in Q1.
These important market share gains were delivered across all major business segments, including health beauty consumable general merchandise and liquor.
And these market share gains were delivered across all of our major markets within California, and New York City markets among key contributors to the increase.
We know we're going to have to work hard to continue these trends going forward, but rest assured that we are recognizing our associates for this success. So that they can see the results of their dedication commitment and perseverance.
This gives us critical momentum as we continue to overhaul our merchandising assortment to fully live up to the elevated health and wellness standard that will differentiate rite aid from the competition.
In terms of marketing, we're very excited to be building assets that support our fund in fresh new brand in preparation for a full scale new brand launch this fall.
As Hayward mentioned as we sit here today, the first wave of stored exterior refreshes is actively underway with 25 already completed.
Over the next several months our communities will begin to notice our fleet being updated as facades are clean and pylons and signage replaced with ones, reflecting our new brand identity.
Commencing this work is an exciting milestone for our REIT 18, and an outward signal of exciting change to come as we build up to our official brand launch this fall.
We are laser focused on meeting the needs of our new growth target consumer millennial in Gen X women, who take care of themselves their children their parents and their pets.
And as mentioned earlier, we are already beginning to see growth in front end sales that are attributable to this new growth target shopper, which is encouraging given that as Howard mentioned, we're still in the early stages of our re merchandising initiatives and have not yet even officially launched our new brands.
Through rigorous primary research we've identified key areas she needs help with together driving including sleep immunity stress and integrated beauty, where the idea is a beauty starts from within.
Into reaches target consumer we continued to ship resources away from the Prince circular to focus on digital engagement in sales.
We are as committed as ever to deliver an elevated omnichannel experience the growth target consumer demands.
Of course, our E commerce in digital channels are key components of that.
And now the team that is fully focused on this experience we are aggressively moving to deliver a best in class frictionless experience across all touch points to ensure that our customers have access to our products and service whenever and however, they want them.
And as I've noted in prior calls we had already begun taking important steps to strengthen E. Commerce, just before cobot 19 hits as part of our Rx evolution strategy.
And then we rapidly accelerated these efforts in a direct response to the unprecedented demand spike we've experienced during the quarter scolded 19 crisis.
In a matter of three weeks the team worked tirelessly to increase our fulfillment cap capacity by 700%.
It was all hands on deck, and we learned a lot about where we need to invest and what our infrastructure will look like to support continued digital growth at scale.
This is only the beginning we have more to do with efficiency gains and we will not let up.
We're now in a position to use the levers we have to optimize demand profitability in share of wallet.
You will see as testing and adjusting more frequently as we optimize and pivot in real time.
In addition to ecommerce we provided a new convenient outlet for customers this quarter by launching a new nationwide partnership with Instacart, allowing customers to conveniently order and receive essential health care in grocery items delivered directly from our stores to their homes.
And this quarter, we expanded instacart delivery from a limited number of markets to our more than 2400 locations with early signals of success. In addition to same store basis revenue growth. We saw overall increases in average order value at plus 87% and units per transaction at plus four.
Sent from last year.
In addition, we recently completed the successful expansion of pay him go to all stores pain go significantly expedite prescription pick up both in store and at the drive thru and we've been receiving excellent feedback from our customers in our pharmacists.
In response to cope with 19 in the Spike in demand for Tele health, we accelerated the launch of Rite aid virtual care.
And looking ahead, we are making progress and rolling out a new buy online pickup in store offering which will be shaped by new consumer preferences emerging from Kobin 19, including enhance drive thru and curbside pickup options.
Before I turn it over I'd like to sincerely. Thank our entire rite aid team for all they have done.
All they are doing.
And all they will do as a pires tirelessly serve our communities during the cold with 19 crisis, all will not missing a beat in executing according to plan, our Rx evolution strategy.
Our associates have done amazing work to make important progress while recognizing the critical work. We have ahead of us to fully realize our vision for the future.
I look forward to continuing these efforts with such a passionate and dedicated team as together, we look to help our customers not just get healthy but to get driving.
And with that I'd like to now turned it over to Dan Robson for an update on elixir.
Death.
Thanks, Jim.
Before we update you on our key initiatives. It is important to talk about how proven 19 has impacted our business.
From a business continuity standpoint, we've encountered no disruption to operations. The team has performed well over the last three months for the quarter. Our increase in mail business was partially attributable to covert 19th.
In addition, we saw an increase in maintenance medication utilization in the retail networks. We are seeing a moderate downturn membership as employers are rightsizing in Workforces. Moreover, strip volume was down somewhat due to the deferral of Dr. office visits luftig elective surgical procedures.
Although these trends have not had a material impacting our business moving forward, we will continue to keep a close eye on these trends.
Regarding the lectures execution on key initiatives, we're making significant progress, especially now that our leadership team is in place.
And as Howard mentioned, our new team includes Justin right combinations experienced envisionrx assumptions leaders with extensive organizational knowledge as well as new leaders, who bring a fresh perspective, along with strong pharmacy services market expertise.
Integration within elixir in between Elixir in writing is moving forward as planned.
We have taken action as recently as yesterday to realize immediate operational synergies and eliminate unnecessary expense.
This process will continue in coming quarters as our leadership team continues to drive integration to all aspects of daily operations.
Our rebranding is also well underway, we have a plan in place to complete the submission of prior to the end of 2020.
And we're making good strides with investments in our improved integrated technology infrastructure.
Also elixir will be implementing a best in class digital experiences is differentiated engaging and streamline for customers. These products will establish new capabilities consolidate portals into one platform and establish a foundation for winning new business.
All of these initiatives will enhance our value proposition to target markets as we move into the 2022 selling season.
I am pleased with our results.
Given that this is a long term projects and all that almost all that is happening in our world today.
First quarter results were strong with adjusted EBITDA increased by 18.1 million or 68.6% compared to the first quarter the prior year.
This increase was primarily driven by continued focus on improving margin, including our significant efforts to optimize our network strategy.
Revenue was favorable prior year by 411 million were 26.2%. This increase in revenue was principally due to an increase in Medicare part D membership.
While growth in the Medicare part D. Membership is exciting so we're generic focus to strengthening our enterprise EBITDA within this Medicare part D space.
Also with Elixir Pharmacy mail order revenues are up 23% year over year due to both Medicare part D utilizing members and Coca My team.
Specialty revenues were up 12% year over year due to the increase utilization by our commercial as well as Medicare part D members.
Elixir PBM business continues to see strong client retention rate of approximately 95% from 2021 selling seasons.
Elixir will no longer wave early refill limits on 30 day prescriptions for maintenance medications on a state by state guidance for reopening.
Many of these efforts have already occurred as of June purchased 2020.
Southern States will have early.
We feel too soon edits reimplementing by July 1st Twentytwenty.
Due to cold we are seeing RFP is being deferred.
In light of that we're highly focused on the 20 to 22 selling season and capitalizing on the opportunity to win new business with employers as well as with National Regional and provider Love Health plans. We're also excited about our opportunity to be the only mid market independent PBM that is owned by a pharmacy, which we believe.
Gave us a differentiator to our clients.
Finally, our position as a strong independent Midmarket PBM is resonating.
As an essential option in the marketplace for health plans health systems self insured employers in units.
With that I'll now turn it over to Mark for some comments on our Q1 financial performance.
[music].
Thanks, Dan.
Good morning.
On this morning's call I'll walk through our first quarter results.
Provide some details in the bond exchange, we announced this morning and also discuss the potential impacts of Kobin 19 on the business for the remainder of the year and our rationale for withdrawing our fiscal 2021 guidance.
Revenues for the quarter over $6 billion, which were up approximately 655 million or 12.2% from the prior years first quarter.
We saw strong revenue growth in both our pharmacy services and retail pharmacy segments.
Net loss for the quarter was 72.7 million or $1.36 cents per diluted share compared to a loss of 99.3 million or $1.88 cents per diluted share in last year's first quarter.
Adjusted net loss in the current quarter was $2 million or four cents per diluted share versus an adjusted net loss of $7.5 million or 14 cents per diluted share in the prior year quarter.
The improvement in our adjusted net loss was due primarily to higher gross profit and a decrease in interest expense, partially offset by an increase in SGN expenses due to covert 19 related investments.
Adjusted EBITDA was $107.4 million in the current quarter compared to $110.3 million in the prior year quarter.
The quarter benefited from strong performance at elixir, but was negatively impacted by the impacts of cobot 19 on the retail segment in the current quarter and a reduction in WGBH TSC fee income.
From the prior year.
We have completed the sale of the last distribution center to WB, a in May and have completed our obligations under the TSA agreements.
Retail pharmacy segment revenue for the quarter was 4.1 billion, which was 258 million higher than last year's first quarter.
Our increase in retail pharmacy segment revenue was driven by an increase in same store sales of 6.6%.
Front end same store sales were up 16% after excluding cigarette and tobacco sales.
Pharmacy same store sales increased by 2.2% with same store prescription count up 40 basis points on a 30 day adjusted basis.
Driven by growth in 90 day maintenance prescriptions offset by a reduction in Q prescriptions of 14.8% in the quarter, resulting from the postponement of doctors office visits and elective surgical procedures in connection with the Kobin 19 pandemic.
We will continue to focus on driving script growth through our broad immunization and medication adherence interventions as well as aggressively pursuing prescription file buys and by working to gain further access to new networks in markets, where we have strong market presence.
Total retail pharmacy segment gross profit dollars in the quarter was 51 million better than last year's first quarter and gross margin was 43 basis points worse as a percent of revenues.
During the quarter, we recorded a onetime restructuring charge of $26 million to establish an inventory reserve on product lines, we are exiting and will no longer carry as part of our rebranding initiative.
This charge is not included in adjusted EBITDA.
Adjusted EBITDA gross profit was favorable to last year's first quarter by $58 million and 28 basis points worse than prior year as a percent of revenues.
Our increasing adjusted EBITDA gross profit was driven by improvements in our front end sales.
The 28 basis point decline in adjusted EBITDA gross margin is due primarily to higher markdowns on increased sales volume to our wellness plus members.
Also as a temporary showed appreciation to our associates, we offer higher discounts on front end merchandise in the first quarter, which had a negative impact on our gross margin.
Retail pharmacy segment SGN expense for the quarter was $37.7 million higher and 82 basis points lower as a percent of revenues to last year's first quarter.
Our adjusted EBITDA as Gionee was 79.2 million and 37 basis points worse than last year.
The increase in adjusted EBITDA SGN, a was primarily due to covert 19 related expenses, which included our hero pay and hero bonus programs pandemic pay and store cleaning and sanitation measures to keep our associates and customers safe.
While most of these expenses were related to temporary programs, we do expect our expenses to clean and sanitize, our stores to add an additional $5 million per quarter to X gene expense going forward.
Prior year SGN a results also benefited from $13 million in TSH fee income that we no longer have as we have execute exited the TSA.
Our pharmacy services segment Elixir had revenues of $2 billion, which was an increase of 411 million or 26%.
Primarily due to an increase in our Medicare part D revenues as we continue to grow our membership.
Adjusted EBITDA for the Pharmacy services segment of 44.4 million was 18.1 million better than last year's first quarter adjusted EBITDA.
Pharmacy services segment adjusted EBITDA benefited from increased revenues and improvements in pharmacy network management and good cost control.
While we did see some reduction in commercial plan membership due to lay offs associated with Koby 19.
They did not have a material impact on the quarter results.
Our cash flow statement for the quarter shows a use of cash from operating activities of $180 million in the current year quarter compared to a use of cash from operating activities of 51 million in the prior year quarter.
The cash from operating activities in the quarter was negatively impacted by the growth in our calendar 2020, Medicare part D receivable.
Timing differences in the receipt of our monthly capitation payment from CMS and a temporary build in pharmacy inventory to hedge against any disruptions in the generic supply chain.
Partially offset by reductions in front end inventory as we continue to execute on our inventory management initiatives.
Our debt balance net of cash was $3 billion at the end of the first quarter and our leverage ratio was 5.7 times adjusted EBITDA.
Our liquidity of approximately 1.7 billion is very strong and with no debt maturing until 2023, we had the flexibility in the runway needed to execute our strategic initiatives.
We do expect our leverage ratio to get worse in the second and third quarters of fiscal 2021, as a 2020 CMS receivable grows, but then expected to improve in the fourth quarter, when we securitize that receivable.
Today, we announced a transaction at furthers our ongoing efforts to address our debt maturity profile, we're offering new exchange up to 750 million of EUR six in an 8% senior notes due in 2023 for a combination of $600 million in new secured notes due in November.
2026 and cash.
This transaction will improve our debt maturity profile, while maintaining ample liquidity and minimizing the overall impact to interest expense.
I'll now spend a few minutes, providing an update on how covered 90 continues to impact our business.
Our front end revenues continue to benefit from increased demand with front end same store sales, excluding cigarettes, and tobacco, increasing 7.2% through the first three weeks or June compared to the same period in the prior year.
Same store prescription counts increased 80 basis points in the first three weeks of June compared to the same period in the prior year due to a lessening impact of acute prescription declines which were down 11.7%.
Regarding supply chain, our current supply of branded generic drugs is good and we have substantially improved our in stock levels on high demand essential front end merchandise.
So we are back in stock on a regular basis.
Given the potential protracted nature of Kobin 19, pandemic, we've identified several potential opportunities and risks to our business.
Our opportunities include but are not limited to.
Increased demand for immunizations.
With recently issued CDC guidance at stresses the importance of flu shots in the fall, we're expecting an increased demand for these immunizations.
Continued increased demand for our front end products.
And continued expansion of our Kobin 19 testing capabilities.
The potential risk related to our business related to Kobin 19 include but are not limited to.
The potential for a second wave of Kobin 19 related shutdown activities, which could result in continued softness in acute prescription demand.
Slower returned to pre cobot outpatient visit and elective surgery levels, which could continue to depressed acute prescription demand.
The potential the impact of a potential protracted economic recession.
Central supply shortages with certain generic drugs.
Increase cleaning and sanitation costs.
Potential reductions in membership at elixir.
And a soft elixir 2021 selling season.
Given the significant amount of uncertainty around the pad pandemic the potential volatility in our business related to the opportunities in risk is previously outlined and the related short and mid term macro not macroeconomic impact.
At this time, we're not in a position to accurately forecast the future impacts of these items in our business and consequently, we are withdrawing our guidance.
We expect to generate free cash flow in fiscal 2021 and are taking the following steps to do so.
We are continuing to closely manage and reduce costs as we.
Stated in our release. This morning, we've eliminated 254 corporate office positions across both our retail pharmacy and pharmacy services segments.
We've also taken steps to reduce other expenses such as shrink advertising rent travel and call Center expenses. We expect these initiatives to result in savings of over $40 million in fiscal 2001 that were not included in our original guidance and an annualized savings of $55 million.
We will continue to pursue our initiatives to reduce our inventory investment union using lean methodologies and expect these initiatives to generate a working capital benefit.
Of over $150 million in fiscal 2021.
We continue to execute in our brand relaunch, which would be could be completely done in the fall and our store future initiatives.
We now plan to remodel 45 stores in our new format in fiscal 2021 down from our original plan of 75 due to a slowdown in permitting and construction activity caused by Kobin 19.
The remainder of those plan Remodels will move into the beginning of fiscal 2022.
We are also deferring some other capital expenditures originally planned for fiscal 2001 in the fiscal 2022 and are therefore, reducing capital expenditures from our previously announced fiscal 2021 guidance of $350 million to $275 million.
As we've said previously reducing our debt and improving our leverage ratio is critical and we're taking steps to ensure that we achieved this goal even in the face of unprecedented uncertainty.
This completes my portion of the presentation and with that we will now be opening the phone lines for your questions.
Thank you as a reminder to ask a question you want me to press Star one on your telephone.
On to try your question press, the pound or hash key please.
Everyone. Thanks for all the details and Matt I just want to go back to again the risk that you talked about until I think about the potential for that that secondly, and an economic downturn.
Generally think of pharmaceuticals, as being pretty inelastic that ultimately right you're going to come back at some point and you're going to have that prescriptions filled at is there any impact that youre seeing team shifts to mail order.
And in some of those risks that perhaps people have utilized mailing and they're not coming back to the chart from that perspective would be my first question and then secondly, you made a comment around this selling season could just talk about what the retention level for Lextar has been for the selling season I understand it's an unusual selling season and you probably don't have the opportunity that when a lot of new business.
But what's the retention memo that Mike.
Yes early says hey work permanent dump informatic has some of these questions I think I'd like to answer and then John Mac and.
Talk about the guidance situation out yeah, we're really having very strong sales results and we have not.
We believe that will continue.
And we believe traffic will continue to increase as well not the basket size, we don't worry too much about a recession impacting.
Our.
Our our our retail pharmacy business although.