Walgreens Close To Buying Rite Aid

[veteran+]

Fred's circular is nothing like a California Rite Aid. Since the Southern California supermarket strike, they've become mini-supermarkets with extensive frozen, refrigerated, liquor and wine areas. Plus I see no over the counter drug, personal care, make-up items advertised. Their prices are also high on the items I see in the circular vs. California drug stores. CVS and Rite Aid have some very large stores they inherited from Sav-on and Thrifty (and Payless). I see nothing like them on the east coast.

In my area where the Fred's stores actually exist, their pricing is better than Walgreens and Rite Aid. They can beat on pricing, but won't be able to have the selection or handle logistics in the way these customers have come to expect. I see these stores coming back into the hands of WBA within 2 years, and possibly the 600+ Fred's Super Dollar stores as well. Haggen all over again.

Hey wnetmacman.........I sent you a private email.



Thanks

[pseudo3d]

We'll see how the conversion goes.

I think storewanderer is right about Albertsons and Kroger, they've still got a ways to go in repairing the Sav-on name and do not have their drug selection fully built back up properly (plus, if Albertsons is intent on pushing it in SoCal, then they might start putting the Sav-on pharmacy name at Vons first).

But as for Fred's, I wouldn't say "Haggen all over again" because part of what made Haggen's purchase really bad was not just going into markets it had no experience in (small Northwest chain in near-border towns and Arizona?!?) or just expanding too fast, it was controlled by an investment group (that had actually bid on the stores), spent a ton of money closing and attempting to renovate stores, and then those stores weren't exactly equivalent to the stores they replaced, even if they were executed properly (which they were not).

Keeping them as Rite Aids for a few years will allow Fred's to experiment with their customer base and perhaps bring back the same "experience" people liked with Longs. The catch is a strong showing in food and the ability to price it correctly.

[wnetmacman]

Fred's circular is nothing like a California Rite Aid. Since the Southern California supermarket strike, they've become mini-supermarkets with extensive frozen, refrigerated, liquor and wine areas. Plus I see no over the counter drug, personal care, make-up items advertised. Their prices are also high on the items I see in the circular vs. California drug stores. CVS and Rite Aid have some very large stores they inherited from Sav-on and Thrifty (and Payless). I see nothing like them on the east coast.

In my area where the Fred's stores actually exist, their pricing is better than Walgreens and Rite Aid. They can beat on pricing, but won't be able to have the selection or handle logistics in the way these customers have come to expect. I see these stores coming back into the hands of WBA within 2 years, and possibly the 600+ Fred's Super Dollar stores as well. Haggen all over again.

Hey wnetmacman.........I sent you a private email.



Thanks

I didn't get anything from you yet.

[mbz321]

$2.50 for Nabisco Saltine Crackers? Ralphs had them last week for 99 cents and they're normally $1.99. Duncan Hines Cake Mix and Frosting $1.50 each. Vons had them for 88 Cents last week. Ground beef chubs are not something Rite Aid carries now.

Not sure why you are comparing supermarket prices to those of a pharmacy. Pharmacies always have higher pricing on food items...they are basically convenience stores with a Pharmacy counter in them.


And I flipped through both a California Rite Aid circular and one in PA...with the exception of alcohol in the CA ad, everything else was mostly identical.

[Brian Lutz]

I doubt Bartell Drugs would be interested in taking over any significant amount of Rite Aid stores. They have been expanding in recent years, but seem to prefer freestanding stores where possible, and seem to be positioning themselves to be a higher-end store than Walgreens or CVS, with a lot of their stores adding things like ice cream counters, growlers and a heavy emphasis on local and regional products. They might cherry pick some locations in areas they are not in, but probably won't take more than a handful.

[wnetmacman]

But as for Fred's, I wouldn't say "Haggen all over again" because part of what made Haggen's purchase really bad was not just going into markets it had no experience in (small Northwest chain in near-border towns and Arizona?!?) or just expanding too fast, it was controlled by an investment group (that had actually bid on the stores), spent a ton of money closing and attempting to renovate stores, and then those stores weren't exactly equivalent to the stores they replaced, even if they were executed properly (which they were not).

Fred's is in a very similar financial position as Haggen. They have not turned a profit in some time, and now they're taking on a store base larger than the original company. While Fred's isn't as small as Haggen, they are still taking over stores that they won't understand the local demographics. Fred's is a very southern-oriented dollar store that just happens to operate pharmacies (which I've said before). And they aren't very good at either.

No, Fred's isn't owned by an investment group. That is what makes it more frightening, because there is no bankroll to back anything up. As far as renovations, I don't see them doing that in the very beginning, because the average Rite Aid store is similar in size as a typical new build Fred's. We even have two Fred's near here that are in old Rite Aid stores, though one has no pharmacy due to lease restrictions.

Keeping them as Rite Aids for a few years will allow Fred's to experiment with their customer base and perhaps bring back the same "experience" people liked with Longs. The catch is a strong showing in food and the ability to price it correctly.

Fred's does like to experiment with formats, but that usually fails too. They tried to expand hardware in their stores 2 years ago, but have already removed that because it just didn't work and they couldn't keep it stocked.

[pseudo3d]

But as for Fred's, I wouldn't say "Haggen all over again" because part of what made Haggen's purchase really bad was not just going into markets it had no experience in (small Northwest chain in near-border towns and Arizona?!?) or just expanding too fast, it was controlled by an investment group (that had actually bid on the stores), spent a ton of money closing and attempting to renovate stores, and then those stores weren't exactly equivalent to the stores they replaced, even if they were executed properly (which they were not).

Fred's is in a very similar financial position as Haggen. They have not turned a profit in some time, and now they're taking on a store base larger than the original company. While Fred's isn't as small as Haggen, they are still taking over stores that they won't understand the local demographics. Fred's is a very southern-oriented dollar store that just happens to operate pharmacies (which I've said before). And they aren't very good at either.

No, Fred's isn't owned by an investment group. That is what makes it more frightening, because there is no bankroll to back anything up. As far as renovations, I don't see them doing that in the very beginning, because the average Rite Aid store is similar in size as a typical new build Fred's. We even have two Fred's near here that are in old Rite Aid stores, though one has no pharmacy due to lease restrictions.

Keeping them as Rite Aids for a few years will allow Fred's to experiment with their customer base and perhaps bring back the same "experience" people liked with Longs. The catch is a strong showing in food and the ability to price it correctly.

Fred's does like to experiment with formats, but that usually fails too. They tried to expand hardware in their stores 2 years ago, but have already removed that because it just didn't work and they couldn't keep it stocked.

I've never heard of Fred's. Until today, I thought they were northwest-based. I don't think there are any Texas, not that there will be—I'm pretty sure that Rite Aid pulled out of Texas in the late 1990s when they closed the few K&B Drug stores they took over.

I don't think Walgreens (or Albertsons with Haggen) is trying to screw Fred's, it's that there are just no other big drug store chains around anymore thanks to consolidations by CVS, Walgreens, and Rite Aid in the last 10 or so years, eating up Sav-On/Osco, Eckerd, and no doubt a few other smaller players. The same thing happened with the grocery market, because unlike 1999, where Albertsons had a lot of choices on who to divest (not just Vons, but Ralphs and Raley's were in expansion mode), there just weren't enough "mainstream" players to absorb the stores.

As for a lack of investment group, it does introduce more questions for the publicly-traded company. What exactly happened at Haggen and Comvest was murky (selling the stores and leasing them back for quick cash might've worked, and may actually have made money for Comvest). We do know that Fred's closed 50 stores in 2008 (well, everyone was) due to "rising fuel costs" among other things. This does not bode well for Fred's, unfortunately, but there has to be more going on. I would bet money that there's an unknown player behind the Fred's purchase, their true intentions not known.

It would be nice if they ended up buying the Rite Aid name after their time was up, but there's just so many unknowns in play that it's unlikely that will happen.

[cathandler]

If fred's fails as a national competitor, would someone like Dolllar General be interested in getting into the pharmacy game, or just take over some locations for its typical general merchandise offering in markets where they aren't near saturation?

[klkla]

I don't think Walgreens (or Albertsons with Haggen) is trying to screw Fred's, it's that there are just no other big drug store chains around anymore thanks to consolidations by CVS, Walgreens, and Rite Aid in the last 10 or so years, eating up Sav-On/Osco, Eckerd, and no doubt a few other smaller players. The same thing happened with the grocery market, because unlike 1999, where Albertsons had a lot of choices on who to divest (not just Vons, but Ralphs and Raley's were in expansion mode), there just weren't enough "mainstream" players to absorb the stores.

Here we go again. Albertson's could have divested the better locations to established companies and the stores that weren't doing well to wholesalers and small independents just like they did in 1999. It's interesting to note that over 80% of the stores divested to Haggen are once again operating as grocery stores of some sort now. It's been well established that Haggen was chosen because they were likely to fail. The same strategy is being used here.

[wnetmacman]

I've never heard of Fred's. Until today, I thought they were northwest-based. I don't think there are any Texas, not that there will be—I'm pretty sure that Rite Aid pulled out of Texas in the late 1990s when they closed the few K&B Drug stores they took over.

I don't think Walgreens (or Albertsons with Haggen) is trying to screw Fred's, it's that there are just no other big drug store chains around anymore thanks to consolidations by CVS, Walgreens, and Rite Aid in the last 10 or so years, eating up Sav-On/Osco, Eckerd, and no doubt a few other smaller players. The same thing happened with the grocery market, because unlike 1999, where Albertsons had a lot of choices on who to divest (not just Vons, but Ralphs and Raley's were in expansion mode), there just weren't enough "mainstream" players to absorb the stores.

As for a lack of investment group, it does introduce more questions for the publicly-traded company. What exactly happened at Haggen and Comvest was murky (selling the stores and leasing them back for quick cash might've worked, and may actually have made money for Comvest). We do know that Fred's closed 50 stores in 2008 (well, everyone was) due to "rising fuel costs" among other things. This does not bode well for Fred's, unfortunately, but there has to be more going on. I would bet money that there's an unknown player behind the Fred's purchase, their true intentions not known.

It would be nice if they ended up buying the Rite Aid name after their time was up, but there's just so many unknowns in play that it's unlikely that will happen.

Fred's main warehouse and headquarters building is in Memphis. The 'Mother Store' still operates down the road in its original location of Coldwater, MS.

There are 10 stores in Texas, all within 40 miles of Longview.

You're correct about consolidation; there was nobody left to combine with. I believe Walgreens shouldn't be allowed to combine with anyone, much less Rite Aid.

Fred's has always operated close to the cuff; they haven't really been a high flyer.