Walgreens Close To Buying Rite Aid

[mbz321]

I wonder if Fred's is prepared for what it is getting into with this deal. They will gain quite a few stores in CA and this format looks pretty questionable for use in CA, based on their ad. $4 folding pocket knife? Daewoo Microwave?

I'm not sure how a 'California Pharmacy' is any different than the CVS'S/Rite Aid/Walgreens on the East Coast, but a quick flip through their circular shows me its the same junky and/or overpriced merchandise that all the aforementioned stores have. Although this definitely looks like another Haggen-like disaster waiting to happen.

[marshd1000]

I hope this is not a Haggenesque disaster either. I think the stores should have been divided between CVS, Albertsons or Kroger with some going to regionals like Bartell in Washington or Fred's in the South. But it does seem insane that Fred's is getting all the divested stores!

[CalItalian]

In terms of Fred's expansion in the Pacific Northwest, I do see a wrinkle. I wonder if Kroger will put up a fight over a name like Fred's? I could see where some folks might think they are related to Fred Meyer Stores. If that occurs, I am wondering if Fred's could use, perhaps under license, the PayLess Drug name or Pay 'n Save? I am also wondering if Walgreens will keep Thrifty Ice Cream, or if that would go to Fred's?

PayLess Shoe Source was Volume Shoe Source in areas where PayLess Drugs operated. Then they changed their name when PayLess became RiteAid so I do see the name becoming an issue. Kroger has the money to fight this legal battle especially since so many people call Fred Meyer "Freddy's" and some even call it "Freds". Kroger has little to lose by challenging the name.

Payless Shoes was always Payless shoes in Los Angeles when we also had Payless Drug stores. Fry's Electronics and Fry's supermarkets co-exist in Arizona today (and Fry's Electronics came much later to the state). There is no confusion.

[CalItalian]

I wonder if Fred's is prepared for what it is getting into with this deal. They will gain quite a few stores in CA and this format looks pretty questionable for use in CA, based on their ad. $4 folding pocket knife? Daewoo Microwave?

I'm not sure how a 'California Pharmacy' is any different than the CVS'S/Rite Aid/Walgreens on the East Coast, but a quick flip through their circular shows me its the same junky and/or overpriced merchandise that all the aforementioned stores have. Although this definitely looks like another Haggen-like disaster waiting to happen.

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 real over the counter drug, personal care, make-up items deals. 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.

$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.

[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.

[CalItalian]

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.

I don't think much of their pricing after looking at their circular. Southern California is quite competitive on pricing considering the cost of doing business in California. Ralphs or Vons, most in the same shopping centers as a Rite Aid, easily will beat them in Southern California. Also, Rite AId has invested heavily in its beauty area in remolded stores and they are some of the nicest stores of any chain, drug or grocery. I see no beauty in their ads. Or real personal care items. Fred's ad is a complete joke.

[wnetmacman]

I don't think much of their pricing after looking at their circular. Southern California is quite competitive on pricing considering the cost of doing business in California. Ralphs or Vons, most in the same shopping centers as a Rite Aid, easily will beat them in Southern California. Also, Rite AId has invested heavily in its beauty area in remolded stores and they are some of the nicest stores of any chain, drug or grocery. I see no beauty in their ads. Or real personal care items. Fred's ad is a complete joke.

They have a full beauty section, as well as personal care items. Most of their stores are larger than the average Rite Aid and do carry more products. They do not list all items or departments in every ad.

Until Fred's or Rite Aid post a location list, this is a moot point. They may not take anything in CA. It would be a surprise if no divestment were required there, but it is definitely going to be a stretch for Fred's to operate those stores.

[pseudo3d]

I'd bet some of the stores in SoCal will become "new" Sav-on stores given that Albertsons wants to keep the name alive there. They've definitely got the food aspect okay.

[storewanderer]

I suspect Albertsons wanted these stores. Or maybe they wanted some of them but then Fred's managed to get this deal to pull off buying ALL of them and Fred's is not a buyer that will create anti-trust concerns in the west coast (which is where I suspect the bulk of the stores being sold are).

If Fred's fails, and closes stores, sells off pharmacy records, etc., then we will see what happens... would Albertsons or Kroger buy failing drugstores or just move the pharmacy records into nearby supermarkets? I think we know exactly what they'd do...

At this point I do not see Albertsons (or Kroger) entering the freestanding drug store business unless they were to buy a chunk of these stores. This was a "now or not anytime soon" situation. Albertsons looks to be having some problems the past few months based on staffing levels and pricing that I am seeing. Deflation is not good for the grocery business but it throws a major curve at a company that has been trying to shore up its sales numbers for an IPO.

Getting some of the nice and recently remodeled Rite Aids in the west would actually be very helpful for Fred's to better itself in the OTC/Beauty category. Fred's operates with 20% or so lower everyday pricing than Walgreens/Rite Aid/CVS but is not nearly as promotional... my observation is Fred's may hit more categories than Rite Aid but the depth of mix is quite a bit smaller (far fewer SKUs per category).

There will absolutely be stores divested in CA. I suspect the majority of stores being divested are in CA; Rite Aid has about 500 stores in that state and I think Walgreens count is close to that.

[storewanderer]

So if I look at financials:

Freds Revenue for the fiscal year ended 01/30/2016 Total $2,150,703,000 Divided by 641 stores = average revenue per store $3,355,230
Rite Aid Revenue for the fiscal year ended 02/27/2016 Total $30,736,657,000 Divided by 4,561 stores = average revenue per store $6,739,017

It is also known that Rite Aid's per store volumes are lower than Walgreens or CVS so that makes this look even worse...

Also very warming for Walgreens/Rite Aid to release this a few days before Christmas, not identify the impacted stores, and say that they will also sell to Freds "other things" whatever that means... great way to cast uncertainty throughout the entire company about what is going on...

Also looks like Fred's has not turned a profit since 2014. Again I say, come on. What is this?