Rite Aid's Future

jamcool
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Re: Rite Aid's Future

Post by jamcool »

krogerclerk wrote:For the last two years, Rite Aid has been cited as a company not likely to survive the year. Thus far they have survived, but the decision to stop new store construction does not bode well. RAD stock price is an all time low and I'm sure the banks are refusing to finance new store construction.

The demise of RAD would eliminate a viable 3rd drug store chain, and more to the advantage of CVS and Walgreens than any independents and regional drug chains. WAGS and CVS would lose a major competitor in several markets as well as be the likely buyers for closed locations. This would be a bigger boon for WAGS than CVS which is digesting Longs. WAGS growth has primarily been organic, with the exception of Happy Harry's, Duane Reed, and the occasional independent, but has a less concentrated presence in both the West and East coast than CVS or RAD, allowing them to become a major player on both coasts.
Walgreens would be very interested in Rite Aid's SoCal stores...it would give them greater presence in the heart of Los Angeles and in San Diego (WAG is mostly in the outer suburbs of those cities).

CVS would probably be interested in Rite Aid's Colorado stores as an entry into the Denver market.
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Re: Rite Aid's Future

Post by wnetmacman »

jamcool wrote:CVS would probably be interested in Rite Aid's Colorado stores as an entry into the Denver market.
I'm not so sure about this. When CVS bought their share of the Eckerd stores, they passed up on several stores in Colorado, including some under construction.

Where I feel Rite Aid went wrong was twofold; first, they bought up and eliminated not less than three highly popular companies in their respecive ares: Thrifty, Payless and K&B. The second part of the mistake was that after the acquisitions, they highly reduced the items sold in these chains' comparatively gargantuan stores and didn't remodel them well; K&B stores wer an average of 20,000 sq. ft., where a Rite Aid was much smaller. CVS and Walgreens really do a better job of assmilating acquired stores into their fold.
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Re: Rite Aid's Future

Post by storewanderer »

Rite Aid has steadily been closing up shop in Colorado after spending a rather considerable amount of money building new stores there in the late 1990's. They don't have many stores left in the state and oddly much of what remains is large format former Osco Stores, though some of the new builds are still operating.

The distribution arrangement for the Colorado Rite Aids isn't particularly good, either. They are being supplied from California. CVS does not operate anything in Utah either, where Rite Aid has a decent presence but virtually all old larger strip mall stores that still look like Osco inside.
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Re: Rite Aid's Future

Post by Alpha8472 »

My local Rite Aid has completely eliminated all of their plants. I don't know if this is chain-wide. Plants aren't very profitable for Target, so perhaps they aren't profitable for Rite Aid either.
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Re: Rite Aid's Future

Post by storewanderer »

None of the Rite Aids around here have any leftover plants either. I think usually they carried plants and stuff into August at some stores then clearanced in September. With how they did 50 and 75 percent off of the garden soil, chemicals, planters, etc. in early July I can see how there wouldn't be much of a reason for them to have kept carrying plants into August.

It is one thing to clearance things like beach towels and patio items in July but to clearance garden supplies when you still have plants, I don't know. Many of the large format stores should have plant stuff all year but even those stores clearanced a lot of it out this year.

CVS still has plants at some stores. Some stores never had them to begin with that used to have them as Longs.
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Re: Rite Aid's Future

Post by norcalriteaidclerk »

As a 12-year Rite Aid veteran who has worked at the same operation from the get-go(even though it relocated just over a year into my tenure),I just wish for them to hang in there and not go BK and/or fold.Also,any merger would be problematic:First,any overseas operator or private-equity firm wishing to buy them out will have to assume a lot of debt.Additionally,any established retailer(particularly if it was either major big-box discounter OR either of RAD's two traditional competitors)trying to acquire RAD would likely have problems getting FTC clearance(even though none of the three fully blanket the entire Sacramento region).On top of that,the fact that Rite Aid has unionized stores on certain regions(including all California stores)could factor significantly in a bankruptcy,merger,or breakup among the big 2 despite the fact that CVS/pharmacy has its share of unionized stores on a regional basis(the SoCal Sav-On locations still are,though it was never the case with Longs even as an independent chain)...

While Mary Sammons hasn't exactly been mistake free,she has for the most part saved the company from the death sentence that was inflicted by the wheeling and dealing of the Martin Grass era.I just hope that John Standley doesn't have his work cut out for him...

BTW,on the subject of plants,as far as I can remember,the plants at my store are usually dead by early July every year...
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Re: Rite Aid's Future

Post by Alpha8472 »

Here is one of many questions. If Rite Aid continues on, how long until they can repay all of their debt? 20 years? 30 years?

Blockbuster has a huge amount of debt. They keep claiming that they are alive. However, their debt is going to be due in a matter of months. Movie Gallery/Hollywood Video said they were alive. They had debt and eventually had to shut down. Debt is what kills a company. Even if their stores make money, there is not enough time to make enough money to pay their creditors. The creditors will come knocking and companies fail.

What about Rite Aid? When is their debt due? Can they simply limp along making a small amount of profit and survive for another 30 years and then break even? Surely some creditor is going to come along and demand the money that Rite Aid owes.

What is a possible scenario for Rite Aid? I would suspect that Rite Aid would sell some more of their profitable stores to pay off their debt. For example, they sold all of their stores in San Francisco to Walgreens. They could sell various stores around the country. CVS bought SavOn stores in Southern California several years ago and the employees were kept on. I think that would be win win situation for the employees of some stores.

However, as a whole, Rite Aid is a mess. They have debt, and with any debt someone will come along and demand their money eventually. If not soon, sometime in the next few years.
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Re: Rite Aid's Future

Post by tesg »

I don't think the video rental industry is a fair comparison because, in that case, the floor fell through the business model. Something came along that replaced it (streaming and Redbox) and their customers abandoned them seemingly overnight.

There's nothing on the horizon to replace drug stores.

A better comparison would be K-Mart, who have hobbled along with poor sales and huge debts for over two decades before the Sears merger.

I don't see Rite-Aid as a wise investment, and I think they'll be a shrinking company, but we're far from seeing the bottom fall out.
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Re: Rite Aid's Future

Post by storewanderer »

Rite Aid's next major debt comes due in 2012.

The stores seem lifeless. Some of the merchandising things they are doing will probably help them but it is going to take some time.

What I notice time after time with Rite Aid, at least on the front ends, is the employees are exceedingly friendly. I cannot say this for Walgreens or CVS. Though CVS is generally pretty good in the former Longs.
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Re: Rite Aid's Future

Post by tesg »

storewanderer wrote:Rite Aid's next major debt comes due in 2012.
Rite-Aid successfully refinanced at a better rate last week. The new line is due 2015.
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