Rite Aid's Future

[krogerclerk]

While many RAD locations are low in volume, the stores do generate a cash flow, meaning even if they lose money, they often would be more costly to close, because at least some of the costs are being recouped. Many of the western RADs that were Thrifty/Payless are Western Union agents, which helps generate cash flow and puts commissions for wire transfers on the bottom line.

With that, RAD can limp along for several years while it repays its debts and should be in sound fiscal shape by the time it's paid back in 2015. The refinancing until 2015 should lower the monthly payments which will allow more cash flow to be put into remodels, new builds, and merchandise. I doubt RAD will make any attempt at another acquisition anytime soon, but there are still markets that it's possible that RAD would exit.

[storewanderer]

2015! That is great news. I missed that somehow.

[norcalriteaidclerk]

For the most part,Greater Sacramento has for the most part been one of the strongest markets in the company's lucrative Western Division.For the most part,RAD has opened more stores locally(including a couple of acquired independents)than it has closed;and nearly all the core Thrifty PayLess legacy units have either been relocated(as was the case with my operation)or fully remodeled,the lone exception being a single well-preserved PayLess Drug unit at 4020 Florin Road.Some of the most lucrative units are actually within walking distance of either or both traditional competitors.Additionally,given its strength in other Central Valley markets,southern California(I believe CVS/pharmacy still lacks an Imperial Valley presence),and extreme northern California(no CVS north of Eureka/Arcata or Redding);I do not see RAD exiting the Golden State even in the event of a bankruptcy.The only area in CA where they've seriously contracted has been in the Bay Area(the only area where Walgreens dominates in a state where it remains in third place store count-wise in most other markets)...

Another thing is that a majority of the store closures have occurred back out in its core East Coast markets where the stores are mostly smaller/older and very close to each other(a contributing factor being store duplication due to the Broocks Eckerd acquisition).Here out West,there have been a lower percentage of store closures;and the only currently weak states in the Western Division(excluding Nevada where they are down to a single store and Idaho which is now basically an extension of their strong Pacific Northwest presence)have been Colorado and Utah where nearly all the stores are in or around their respective big metros(Denver,SLC).One idea I've floated around would be that of RAD moving it's corporate HQ out west(I believe that the TPI corporate campus in Wilsonville is still usable,not to mention that they still use the distribution center there.).If they can't fix the their core East Coast operations,they should at least consider this cross-country HQ move.On the surface,it may sound like putting lipstick on a pig,but it's clear that the West is where much of their revenue is coming from now...

[krogerclerk]

RAD could certainly rationalize their store counts on the east cost by replacing older smaller units that are close together with a single larger stand alone location. RAD and Eckerd Brooks were behind CVS and WAGS in opening freestanding drug store. In Pennsylvania, RAD's home state, RAD has stores that originated as Eckerd, Thrift Drugs, and Rite Aid. Generally RAD and CVS are the #1 and #2 east coast drug chain with WAGS #3. WAGS recent expansions in the southeast is challening RAD for the #2 or #1 spot in many of its and Eckerd's strongholds as years of both Rite Aid and Eckerd not expanding are now taking a toll. I would think Atlanta as the eastern market most likely for RAD to exit, as the Newnan, GA warehouse was recently closed and both WAGS and CVS spent the last decade building new stores at most every intersection.

[norcalriteaidclerk]

RAD could certainly rationalize their store counts on the east cost by replacing older smaller units that are close together with a single larger stand alone location. RAD and Eckerd Brooks were behind CVS and WAGS in opening freestanding drug store. In Pennsylvania, RAD's home state, RAD has stores that originated as Eckerd, Thrift Drugs, and Rite Aid. Generally RAD and CVS are the #1 and #2 east coast drug chain with WAGS #3. WAGS recent expansions in the southeast is challening RAD for the #2 or #1 spot in many of its and Eckerd's strongholds as years of both Rite Aid and Eckerd not expanding are now taking a toll. I would think Atlanta as the eastern market most likely for RAD to exit, as the Newnan, GA warehouse was recently closed and both WAGS and CVS spent the last decade building new stores at most every intersection.

Actually,considering that they still have a high store count with the Peach State,I find it highly improbable that Rite Aid would even consider bailing out of Georgia(despite a third place market share on other Deep South states).However,I am concerned that within the Golden State alone,Walgreens appears to be on the brink of surpassing RAD for second place in California store count(Rite Aid has 594 California stores as I speak while Walgreens had 581 at the end of August).As recently as 2 years ago(before the Longs merger with CVS was completed),RAD had the California store count crown with over 610 stores.Then,CVS grew to over 800 California stores with the Longs purchase to wrest away that crown.Now even in some eastern states like Ohio,RAD has fallen to third place;and the states where RAD is first place in store count are now down to Oregon,Washington,and certain northeastern states(particularly it home state of Pennsylvania where they have will over 500 stores).Again,I just hope my company can just hang in there and avoid bankruptcy though the silver lining is that the antitrust laws are helping keep the chain alive.I've even run into false rumors on another board suggesting that GNC is considering bailing out of its partnership with RAD though that may be tricky...

On my end,my store has seen a bit of a traffic drop on evenings as of late(even though I've been taking on some day shifts as my store hired its first new employees in months);and I wonder if it has to do with the WAG close by adding beer and wine.Hopefully,the 'new' Vallejo store that just opened won't be one of the last new builds for Rite Aid...

[Alpha8472]

With the announcement of the 10 new Save-A-Lot Rite Aid combos, everything seems to be looking much brighter for Rite Aid. These Save-A-Lot Rite Aid combo stores are what will save Rite Aid.

Save-A-Lot stores draw in a lot of customers and are profitable on their own. Rite Aid will gain tons of traffic.

Save-A-Lot announced that they are building a brand new distribution center in North Carolina to handle their future expansion in the South. This means that Rite Aid probably has already decided to turn many of their stores in the South into Save-A-Lot Rite Aid combo stores. Georgia isn't too far from North Carolina and those Georgia Rite Aid stores are good candidates to become Save-A-Lot combo stores.

Rite Aid's can easily add Save-A-Lot stores into their existing West Coast stores as well. There is plenty of room in their large West Coast stores. People love discount grocery stores like Grocery Outlet. Save-A-Lot is similar in many respects and will do well.

[Super S]

This came to my mind as Supervalu announced a number of Albertsons and Save-A-lot closures yesterday. Are the Rite-Aid/Save-A-Lot combos jointly operated, or is it a franchise? Save-A-Lot, by itself, has not done particularly well in the Portland, Oregon market, where many of the larger Rite Aid (Former PayLess Drug) stores are located.

[Alpha8472]

Rite Aid owns the Save A Lot/Rite Aid Combo stores. Rite Aid pays Save A Lot to use the Save A Lot Name on these combo stores.