Rite Aid's Future

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Alpha8472
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Rite Aid's Future

Post by Alpha8472 »

Rite Aid has not been doing well for years.

They have been named one of the companies that might not survive 2009. I don't know how this chain can possibly continue.

http://finance.yahoo.com/news/15-Compan ... 79875.html

Rite Aid has some really old and rundown locations that are poorly run. I just walked through a former Thrifty the other day and the shelves were practically empty. It looked like they had given up stocking them long ago. They also have some stores that are in better shape.

The one thing that I like is that they still have Thrifty Ice Cream. No other drug store offers scoops of ice cream like that. If Rite Aid goes out of business, then Thrifty is truly dead.

If Rite Aid shuts down, what will happen to their stores?

Maybe some of the stores would be snatched up by Walgreens or CVS. However, Walgreens and CVS would most likely not sell scooped ice cream.

I always wondered how Rite Aid could be so poorly run? What caused their financial troubles?
Last edited by Alpha8472 on March 1st, 2009, 12:34 am, edited 1 time in total.
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Re: Rite Aid's Future

Post by storewanderer »

Rite Aid was poor operationally for a long time in the 1990's, but the thing that pushed them over the edge was management overstating earnings and other figures from the mid to late 1990's. They were one of the first major companies to have major accounting irregularities take place in that era. Basically, Rite Aid bought chains in the mid and late 1990's with money they did not even have (since earnings had been overstated). The new management that took over in 1999 had to take a huge write down to restate prior earnings and despite some efforts to improve operations, the company's debt load is so large that they are hindered. The stores perform okay, the problem is the stores do not generate enough profit to pay the cost to service the debt. They bought Eckerd (and more debt) last year which I think will be the final breaking point. Some people blame the economy, I don't blame that one bit for Rite Aid's current condition. It is basically just one management error after another.

I've noticed the inventory levels in the CA Stores I've visited in the past couple months is not good, and seems to be getting worse.

I've kicked around the idea of Kroger buying some or all of Rite Aid's west coast stores. I think it could work out for them.
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Re: Rite Aid's Future

Post by Alpha8472 »

I didn't know Kroger had drug stores. I saw a photo of a Kroger Pharmacy in a convenience store, but it was not a true stand-alone drug store.
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Re: Rite Aid's Future

Post by submariner »

Alpha8472 wrote:I didn't know Kroger had drug stores. I saw a photo of a Kroger Pharmacy in a convenience store, but it was not a true stand-alone drug store.
You mean this one I took in Pensacola, FL at a Tom Thumb?
Image
(the funny part, aside from the Tom Thumb C-Stores in Florida, Kroger has no presence there at all)

I'd like to see Kroger take over the company. From what I've been able to tell, they're still financially stable, and it could bring back some sales based on the 'nostalgia factor' if they were to pull off a rebranding back to Thrifty (at least on the west coast).
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Re: Rite Aid's Future

Post by Alpha8472 »

That's the picture.

New Walgreens, Rite Aid, and CVS stores are very much like convenience stores these days. The selection of products in their stores is limited. They are not much bigger than convenience stores and the prices can often be almost as high.

A return of the Thrifty name might increase sales, but they would have to have really competitive prices to attract people. I don't think Kroger would want to take a risk on drug stores. There is too much competition from Walmart, Target, and Costco Pharmacies. Are there Winco pharmacies?

I am just wondering how Kroger is on pricing. Is Kroger the low price leader? A lot of people seem to think that Ralphs is expensive. However, I have heard that Smith's is very cheap compared to other supermarkets.
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Re: Rite Aid's Future

Post by Brian Lutz »

Around here, there are a handful of recently built Rite Aid stores (mostly freestanding) that are actually similar in size to the existing stores. Most of those stores acquired when they bought Payless (and the vast majority of those stores are former Pay N Save stores.)

For those stores, I'd think that Walgreen's (which has a fairly limited presence around here in a handful of freestanding stores) would be the most likely candidate for a takeover of the Rite Aid stores. CVS has no presence in the Pacific Northwest, and Bartell Drugs probably isn't big enough to take on that many stores, and seems content to stick with what they're doing anyway.
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Re: Rite Aid's Future

Post by storewanderer »

I really hope that if Rite Aid goes away, anyone BUT Walgreens or CVS gets the stores.

It wouldn't be that hard for Kroger to run drugstores. They have certain divisions that handle a full drug assortment of goods (Fred Meyer and Smiths primarily) already. The mix of drug items is much more limited at some Kroger divisions like QFC and Ralphs/F4L and is far from a complete drugstore mix.

Kroger pricing varies by region. Some regions are very aggressive on everyday pricing, and others are not. I would argue that Food4Less is strongest on everyday price (obviously) with Smiths not being far behind them on price. Smiths pricing on many items is comparable to Wal Mart/WinCo in this market. Smiths does deal with a lot of different competition due to their geography including a stronger than average base of independents/small chains in Utah. Kroger Central had pretty good pricing too, near comparable to Smiths, but higher on perimeter relative to the competition in that market. Fred Meyer is also good on price. Ralphs is fairly strong on promotion and regular pricing is competitive with other chains in their market if not slightly lower (right now... this could change). QFC is rather weak on promotion and price, but isn't really run like the other Kroger divisions. King Soopers in CO also didn't seem great on price, but a bit lower than Safeway and strong on promotion.
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Re: Rite Aid's Future

Post by romleys »

I dont want any of the stores going to Walgreens or CVS either.
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Re: Rite Aid's Future

Post by storewanderer »

You saw how Walgreens handled a former Payless (Longs from 98-07) over on San Pablo Dam Road in El Cerrito? That place was worse than ANYTHING I've seen Rite Aid operate.

After hitting the 17,000 square foot mark, Walgreens has no idea how to merchandise a store. Hence the very wide aisles on some of their larger, older stores such as 237/El Camino Real in Mountain View or the one near the mall in Yuba City.

I kind of miss Sav-On. They were always a good spot for everyday use items due to their long-term connection with grocery stores. CVS really isn't too bad, but, their merchandise mix is quite limited, staffing levels are very low, and pricing is erratic. I prefer CVS to Walgreens, but that isn't saying much. Make CVS and Walgreens the only drugstores, and I am basically through with drugstores.

As far as Walgreens expanding in the Pacific Northwest, they have a major problem in that those stores are supplied from the Woodland, CA distribution center. There are a lot of supply issues as a result of that. Walgreens needs a distribution center up there to support that group of stores. I suspect Bartell will end up in the hands of Walgreens and a blank check is sitting on the desk of the current owners of that little chain from Walgreens that says to "name your price."

CVS has also talked about expanding organically into OR/WA. OR/WA is somewhat different from other areas. Wal Mart hasn't penetrated it as much and Fred Meyer has a strong presence not seen elsewhere. Another oddity up there is Bi Mart who has pharmacies.
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Re: Rite Aid's Future

Post by luckysaver »

I think Rite Aid will continue to survive. Yes inventory is low in some stores - a few years ago when I went to a Rite Aid to purchase some sale items on the same day the ad came out (Sunday), it would be all gone. My neighborhood store in West Covina CA at one point (2007) was given a low B grade by the LA County Health Department as the management never kept the store clean (now they maintain an A grade).

On RA' s website in 1999, they posted a complete list of all the drug chains they acquired in their corporate history, up to their largest acquistion of the time, Thrifty-Payless. They probably did poorly back then because they spent all their money trying to buy up the drugstore industry.

If RA failed, I think CVS or Walgreens probably might purchase the company and split the retail assets or close underperforming locations. I don't think grocery chains will want to go back into drugstores (after what happened to Albertsons).

Quick notes on other items mentioned in previous posts:

Tom Thumb C-Stores is part of Kroger's Loaf n Jug C-Store group. I've never heard of a Kroger pharmacy inside a Kroger C-Store. For those that don't know, Kroger once ran the Hooks-SuperRx chain in the '70's and '80's. Kroger also operates a standalone Gene Maddy Drugs in the Dillons division.

CVS has some former Savon Express stores (pharmacy-less) and converted them to standard CVS Pharmacies.

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