Wednesday, June 24, 2009

Rite Aid - Tricky Liquidity Headline

Rite Aid (NYSE:RAD) released Q1 results insisting that they have improved their liquidity. Mary Sammons, Rite Aid Chairman and CEO insists she is pleased with the results. The headline in their press release claims an increase to $900 million in liquidity. The tricky word is to and not by. Big difference.

Truly impressive! How did they do it?

Compared to the last quarter cash is down some $15 million. Accounts receivable in the face of declining sales has increased some $80 million or approximately 18%. Meaning the aging of your receivables is growing. Working Capital has decreased from approximately $2.1 billion to $1.8 billion. Inventories have decreased some $150 million but accounts payable have not budged significantly. This means they are stretching out their suppliers.

This does not mean improved liquidity.