Rite Aid Bankruptcy Speculation

[storewanderer]

Given that Rite Aid has largely killed the front end business off, there isn't much value in that business. Or the stores and distribution network. They use a wholesaler for pharmacy. It is unfortunate the decisions made the past few years to kill what should have been a stronger front end than competing chains.

After selling the worst stores to Walgreens, Rite Aid kept many high performance stores and good regions. They could have gotten more aggressive to drive sales and gotten per store volumes up nicely. Instead they cut a bunch of items out and way cut store hours. It was like a suicide mission.

Bartell probably would have been a good strategic purchase for Loblaw (only Bartell, not much if any of the rest of Rite Aid), but for whatever reason they did not bite.

[Bagels]

Given that Rite Aid has largely killed the front end business off, there isn't much value in that business. Or the stores and distribution network. They use a wholesaler for pharmacy. It is unfortunate the decisions made the past few years to kill what should have been a stronger front end than competing chains.

After selling the worst stores to Walgreens, Rite Aid kept many high performance stores and good regions. They could have gotten more aggressive to drive sales and gotten per store volumes up nicely. Instead they cut a bunch of items out and way cut store hours. It was like a suicide mission.

Bartell probably would have been a good strategic purchase for Loblaw (only Bartell, not much if any of the rest of Rite Aid), but for whatever reason they did not bite.

Worst stores? I think Walgreens bought as many stores as they figured the Feds would allow. Bankruptcy may be a good thing in the long-haul as it would allow Rite Aid to dump a large portion of its store fleet, relinquish dark leases and adjust a supply chain that's optimized for when it was double the size.

Wouldn't be shocked to see Rite Aid close its stores in the West. It has a large -- and shrinking -- footprint in SoCal. Not long ago, there was a store on every block along Sunset Blvd (or at least it seemed that way). And yet all of these stores combined had less foot traffic than a busy Walgreens or CVS.
.

[norcalriteaidclerk]

Given that Rite Aid has largely killed the front end business off, there isn't much value in that business. Or the stores and distribution network. They use a wholesaler for pharmacy. It is unfortunate the decisions made the past few years to kill what should have been a stronger front end than competing chains.

After selling the worst stores to Walgreens, Rite Aid kept many high performance stores and good regions. They could have gotten more aggressive to drive sales and gotten per store volumes up nicely. Instead they cut a bunch of items out and way cut store hours. It was like a suicide mission.

Bartell probably would have been a good strategic purchase for Loblaw (only Bartell, not much if any of the rest of Rite Aid), but for whatever reason they did not bite.

Worst stores? I think Walgreens bought as many stores as they figured the Feds would allow. Bankruptcy may be a good thing in the long-haul as it would allow Rite Aid to dump a large portion of its store fleet, relinquish dark leases and adjust a supply chain that's optimized for when it was double the size.

Wouldn't be shocked to see Rite Aid close its stores in the West. It has a large -- and shrinking -- footprint in SoCal. Not long ago, there was a store on every block along Sunset Blvd (or at least it seemed that way). And yet all of these stores combined had less foot traffic than a busy Walgreens or CVS.
.

I don't see an outright closure of all remaining West Coast stores in the cards.This group of stores is basically what is keeping the chain afloat in it's current form.In the even insolvency resulting in a company breakup does occur(unlikely for at least 18-24 months down the road),then maybe an entity like Loblaws or even another international entity such as Mexico's Sanborns or the pan-asian Watsons chain could make a play for the entire Western division(including bartell and the Thrifty ice cream unit as well as the Thrifty trademarks for the purpose of rebranding the California and Nevada stores).Over my dead body would my Golden State be reduced to a duopoly between CVS and Walgreens(don't even get me started on the the wannabe retail monopoly that Sam Walton created).

BTW the Sunset Boulevard corridor still has the vintage 1936-era Thrifty at 7900 Sunset which has been remodeled inside and out many times over the years and is basically a West Coast RAD flagship of sorts(has a fresh day cafe that goes beyond the typical Thrifty hand dip counter).

[storewanderer]

Worst stores? I think Walgreens bought as many stores as they figured the Feds would allow. Bankruptcy may be a good thing in the long-haul as it would allow Rite Aid to dump a large portion of its store fleet, relinquish dark leases and adjust a supply chain that's optimized for when it was double the size.

Wouldn't be shocked to see Rite Aid close its stores in the West. It has a large -- and shrinking -- footprint in SoCal. Not long ago, there was a store on every block along Sunset Blvd (or at least it seemed that way). And yet all of these stores combined had less foot traffic than a busy Walgreens or CVS.
.

There were certain states that were "off limits" to Walgreens. Not just for FTC reasons but because Rite Aid wanted to keep certain states. Walgreens could have picked off 100-150 stores in CA if they had wanted to as there are many Rite Aids in remote locations that have no Walgreens for a while (maybe 20 minutes, maybe 3 hours). Nothing was sold in CA, OR, WA, PA, or MI. This was deliberate. Those were Rite Aid's best states.

In some states like NY that Rite Aid was going to nearly exit initially, that is where Walgreens took what they could and Rite Aid ended up keeping more leftovers than they had planned to.

The Rite Aid supply chain was already optimized because as I recall 3 warehouses (one in KY, one in the Carolinas which was brand new, and one somewhere back east) were sold to Walgreens that were in the regions where stores were sold.

[ClownLoach]

Given that Rite Aid has largely killed the front end business off, there isn't much value in that business. Or the stores and distribution network. They use a wholesaler for pharmacy. It is unfortunate the decisions made the past few years to kill what should have been a stronger front end than competing chains.

After selling the worst stores to Walgreens, Rite Aid kept many high performance stores and good regions. They could have gotten more aggressive to drive sales and gotten per store volumes up nicely. Instead they cut a bunch of items out and way cut store hours. It was like a suicide mission.

Bartell probably would have been a good strategic purchase for Loblaw (only Bartell, not much if any of the rest of Rite Aid), but for whatever reason they did not bite.

Worst stores? I think Walgreens bought as many stores as they figured the Feds would allow. Bankruptcy may be a good thing in the long-haul as it would allow Rite Aid to dump a large portion of its store fleet, relinquish dark leases and adjust a supply chain that's optimized for when it was double the size.

Wouldn't be shocked to see Rite Aid close its stores in the West. It has a large -- and shrinking -- footprint in SoCal. Not long ago, there was a store on every block along Sunset Blvd (or at least it seemed that way). And yet all of these stores combined had less foot traffic than a busy Walgreens or CVS.
.

Without the West there is no Rite Aid. I'd argue that Rite Aid as a store (not necessarily pharmacy which many people don't have direct control over due to their insurance) outperforms Walgreens, at least in the SoCal market. Walgreens has closed many stores here over the last decade even though they never fully completed their attempts to fully expand into the area. They made the mistake of opening too many stores in more difficult urban areas where they had to pull out due to shrink or the stores front ends underperform due to the community's inability to pay their overly inflated prices. They coupled that with choosing the newest centers in the far suburbs in areas that hadn't fully grown in yet. Both groups underperform and yet there are many areas where Walgreens doesn't have a decent presence in SoCal. I never see any foot traffic at their SoCal stores and feel that many of them are prime candidates for closure. The "low volume store" program where endcaps were removed and gondolas shortened and such are all over SoCal, sometimes in centers with a top volume CVS nearby or even the opposite corner.

CVS has slowly but surely been improving their SoCal operation with their remodel program. There are a few low volume stores still present that probably won't be around much longer, these are locations that are obvious because they still have the early 2000's colorful cardboard signage and old smelly gray fuzz carpet. The remodel program (when the store is remodeled to mainly white signs with a red pharmacy) has added back to SKU count in the core drugstore departments of Healthcare products, Beauty, Baby, Vitamins and so on. HealthHub adds more assortment and fixes the long term problem that CVS inherited in SoCal - most of their stores are much larger than the typical prototype CVS and they never had enough merchandise assortment to fill the shelves until this initiative. CVS Y Mas is another space filler that adds SKUs in Hispanic markets. They still don't have the assortment of general merchandise and foods that they had when they were SavOn or Longs, but the selection is far superior now than when CVS first entered the market and gutted the front end of those stores. Couple improved front ends with traffic driven by the strong Aetna and Caremark insurance programs, CVS is obviously improving sales greatly in SoCal after years of underwhelming their customers. CVS has closed a handful of stores in the last couple years under their initiative to reduce count by 900 or so, but it's very few and the majority are obviously overlaps with another very close location as well as obvious difficult stores (bad logistics, dead shopping center, bad center with problems like homeless encampments and absentee landlord). I would estimate for every SoCal CVS that has closed there have been 10 Walgreens closures since their mass entry in the 90s. I also would imagine that CVS for the first time is taking significant share from Rite Aid where they compete.

And then there is Rite Aid. Their Wellness format, especially in new builds and full remodels, is by far the best looking drugstore in SoCal. But the recent management has bungled this competitive advantage by gutting SKU count at the same time CVS was putting back assortment. Then the many closures, some of which have been well documented in other threads as surprising and sometimes leave Rite Aid with little to no presence in a market once completed. The horrible new prototype seen in French Valley that manages to take all the worst assortment issues from CVS, Walgreens, and Rite Aid past and present and magically combine them all into one building. Rite Aid has the most overlap with CVS, so if they were a buyer few stores would survive although in a bankruptcy asset sale antitrust wouldn't apply otherwise such a deal would be immediately shot down by the FTC. Walgreens is adrift and in trouble as well, they have much less Rite Aid overlap and have taken on divisions sold off like Las Vegas. But I don't see them buying anything until they solve the Boots problem and pare down unproductive US stores which ironically seem to be all over SoCal. Hence if most SoCal Rite Aid were to become Walgreens they would underperform as well because obviously the SoCal customer does not like the Walgreens offering. The sad part is that it seems Rite Aid was rolling along doing well and recovering in SoCal at least, seemingly gaining market share at front end, but then management decisions undermined the company performance and the wheels started coming off.

[veteran+]

There are 2 Walgreens in my area.

One in Beverly Hills (too far with traffic and parking drama) and one in West Hollywood (Community, compounding type).

The BH one is okay.

All the CVS' in my area are gross. The Target CVS are okay but I do not see a lot of traffic.

2 Rite Aids (WH & BH). The BH store is nice but traffic and parking is a problem. The WH is on the east edge of WH and is very nice. I try to stay on the western part of WH and will go to that location only if I have to.

So, in this dense area and very high income area the big 3 are not up to par. I would say the Rite Aid in WH is the highest volume.

[ClownLoach]

There are 2 Walgreens in my area.

One in Beverly Hills (too far with traffic and parking drama) and one in West Hollywood (Community, compounding type).

The BH one is okay.

All the CVS' in my area are gross. The Target CVS are okay but I do not see a lot of traffic.

2 Rite Aids (WH & BH). The BH store is nice but traffic and parking is a problem. The WH is on the east edge of WH and is very nice. I try to stay on the western part of WH and will go to that location only if I have to.

So, in this dense area and very high income area the big 3 are not up to par. I would say the Rite Aid in WH is the highest volume.

I should have mentioned CVS doesn't try very hard in LA and surrounding areas. Definitely think Rite Aid is the strongest of the three chains in LA proper. But the pharmacy business might be something different entirely and wouldn't be easy for an outsider to judge unless it's a supremely high volume pharmacy.

Costco is definitely taking quite a bit of share in pharmacy. I'm surprised that they have begun accepting Medi-CAL considering the low repayments. But having watched a new location open over the last year I've seen them go from only housing a few filled scripts to adding more storage and moving from a 14 day holding period down to 7 (in other words if you don't pick up your prescription within 7 days of being notified then they return the pills to stock to make room for others). They definitely are getting a lot of prescription business and usually have at least half a dozen techs plus two pharmacists working non stop. That's a lot especially when you consider many orders are fulfilled by a central location.

What changes has Rite Aid made in the pharmacy itself that have possibly lost them business?

[Bagels]

Without the West there is no Rite Aid. I'd argue that Rite Aid as a store (not necessarily pharmacy which many people don't have direct control over due to their insurance) outperforms Walgreens, at least in the SoCal market. Walgreens has closed many stores here over the last decade even though they never fully completed their attempts to fully expand into the area. They made the mistake of opening too many stores in more difficult urban areas where they had to pull out due to shrink or the stores front ends underperform due to the community's inability to pay their overly inflated prices. They coupled that with choosing the newest centers in the far suburbs in areas that hadn't fully grown in yet. Both groups underperform and yet there are many areas where Walgreens doesn't have a decent presence in SoCal. I never see any foot traffic at their SoCal stores and feel that many of them are prime candidates for closure. The "low volume store" program where endcaps were removed and gondolas shortened and such are all over SoCal, sometimes in centers with a top volume CVS nearby or even the opposite corner.

CVS has slowly but surely been improving their SoCal operation with their remodel program. There are a few low volume stores still present that probably won't be around much longer, these are locations that are obvious because they still have the early 2000's colorful cardboard signage and old smelly gray fuzz carpet. The remodel program (when the store is remodeled to mainly white signs with a red pharmacy) has added back to SKU count in the core drugstore departments of Healthcare products, Beauty, Baby, Vitamins and so on. HealthHub adds more assortment and fixes the long term problem that CVS inherited in SoCal - most of their stores are much larger than the typical prototype CVS and they never had enough merchandise assortment to fill the shelves until this initiative. CVS Y Mas is another space filler that adds SKUs in Hispanic markets. They still don't have the assortment of general merchandise and foods that they had when they were SavOn or Longs, but the selection is far superior now than when CVS first entered the market and gutted the front end of those stores. Couple improved front ends with traffic driven by the strong Aetna and Caremark insurance programs, CVS is obviously improving sales greatly in SoCal after years of underwhelming their customers. CVS has closed a handful of stores in the last couple years under their initiative to reduce count by 900 or so, but it's very few and the majority are obviously overlaps with another very close location as well as obvious difficult stores (bad logistics, dead shopping center, bad center with problems like homeless encampments and absentee landlord). I would estimate for every SoCal CVS that has closed there have been 10 Walgreens closures since their mass entry in the 90s. I also would imagine that CVS for the first time is taking significant share from Rite Aid where they compete.

And then there is Rite Aid. Their Wellness format, especially in new builds and full remodels, is by far the best looking drugstore in SoCal. But the recent management has bungled this competitive advantage by gutting SKU count at the same time CVS was putting back assortment. Then the many closures, some of which have been well documented in other threads as surprising and sometimes leave Rite Aid with little to no presence in a market once completed. The horrible new prototype seen in French Valley that manages to take all the worst assortment issues from CVS, Walgreens, and Rite Aid past and present and magically combine them all into one building. Rite Aid has the most overlap with CVS, so if they were a buyer few stores would survive although in a bankruptcy asset sale antitrust wouldn't apply otherwise such a deal would be immediately shot down by the FTC. Walgreens is adrift and in trouble as well, they have much less Rite Aid overlap and have taken on divisions sold off like Las Vegas. But I don't see them buying anything until they solve the Boots problem and pare down unproductive US stores which ironically seem to be all over SoCal. Hence if most SoCal Rite Aid were to become Walgreens they would underperform as well because obviously the SoCal customer does not like the Walgreens offering. The sad part is that it seems Rite Aid was rolling along doing well and recovering in SoCal at least, seemingly gaining market share at front end, but then management decisions undermined the company performance and the wheels started coming off.

I moved to CA in 2000, shortly after I graduated HS. Maybe a year after I moved, my allergies flared and I was prescribed a medicine that my insurance would only fill in 10-day increments and yet I desperately needed especially when I worked out. So, I visited the drug store at least three times per month. I choose Rite Aid largely out of stupidity as it was the only familiar chain (IIRC, this was in between the time CVS exited and re-entered the market; Walgreens had some stores but they had just entered the market where I grew up and I knew them only as the chain that had stores on every block in Chicago).

I visited multiple Rite Aids -- mainly the one (that recently closed) in Irvine at Alton/Culver but also locations in Garden Groove, Fountain Valley/Huntington Beach, Laguna Woods, etc. Rite Aid was ALWAYS super busy. The ice cream counter clearly brought in the foot traffic on hot summer days. Today, I rarely see any foot traffic in these stores. The Alton/Culver location is a good example -- the wall by the employees' office was loaded with sales volume awards from years gone by, but it turned into a ghost town in the past decade. Meanwhile, the CVS a couple miles up the road at Alton/Jeffrey is thriving.

CVS unquestionably has the most foot traffic locally. Some of that is due to insurance -- as you noted, many large employees use CVS (Caremark) as their pharmacy manager, and employees get lower co-pays when filling prescriptions there. And of course, some portions of SoCal were oversaturated with CVS after it began building its store fleet organically, then acquired Savon, Long's and Target pharmacies. It's only been in recent years that it began to weed excess stores out (presumably as their leases expire). Walgreens doesn't do the foot traffic that CVS does, but in my experiences it's far better than Rite Aid.

Rite Aid's downfall was partially blamed on overburdening its stores with groceries and general merchandise. Groceries were the next big thing ~15 years ago, when everybody raced to add freezers, refrigerators and fresh produce to their stores. Longs had some great prices on their groceries -- we purchased a ton of fresh produce at their Hawaii stores -- but allegedly it was treated as a loss leader. CVS & Walgreens have improved their assortment, but both have pulled back. I've noticed that locally, many CVS stores no longer carry milk, bread and eggs.

Alas, I believe Rite Aid's strength is in its longtime core markets within the East and that the West/ CA stores are underperforming, but of course we don't have access to the hard data.

[BillyGr]

Worst stores? I think Walgreens bought as many stores as they figured the Feds would allow. Bankruptcy may be a good thing in the long-haul as it would allow Rite Aid to dump a large portion of its store fleet, relinquish dark leases and adjust a supply chain that's optimized for when it was double the size.

Wouldn't be shocked to see Rite Aid close its stores in the West. It has a large -- and shrinking -- footprint in SoCal. Not long ago, there was a store on every block along Sunset Blvd (or at least it seemed that way). And yet all of these stores combined had less foot traffic than a busy Walgreens or CVS.

In some states like NY that Rite Aid was going to nearly exit initially, that is where Walgreens took what they could and Rite Aid ended up keeping more leftovers than they had planned to.

All postings that were made showed Rite Aid remaining in NY (while other states they were keeping 0 stores).

Also, there had to be some reasoning as I have noted before, since 2 of the 4 closest remaining Rite Aid locations had no reason that Walgreens couldn't take them (one has a CVS across the street, the other NO pharmacy store within 2-3 miles, and the two closest ones are both CVS, no Walgreens in either area at all). So, they could have taken both of those, but didn't for some reason.

[storewanderer]

Worst stores? I think Walgreens bought as many stores as they figured the Feds would allow. Bankruptcy may be a good thing in the long-haul as it would allow Rite Aid to dump a large portion of its store fleet, relinquish dark leases and adjust a supply chain that's optimized for when it was double the size.

Wouldn't be shocked to see Rite Aid close its stores in the West. It has a large -- and shrinking -- footprint in SoCal. Not long ago, there was a store on every block along Sunset Blvd (or at least it seemed that way). And yet all of these stores combined had less foot traffic than a busy Walgreens or CVS.

In some states like NY that Rite Aid was going to nearly exit initially, that is where Walgreens took what they could and Rite Aid ended up keeping more leftovers than they had planned to.

All postings that were made showed Rite Aid remaining in NY (while other states they were keeping 0 stores).

Also, there had to be some reasoning as I have noted before, since 2 of the 4 closest remaining Rite Aid locations had no reason that Walgreens couldn't take them (one has a CVS across the street, the other NO pharmacy store within 2-3 miles, and the two closest ones are both CVS, no Walgreens in either area at all). So, they could have taken both of those, but didn't for some reason.

The way the deal was initially structured, Rite Aid was going to sell about 250 more stores to Walgreens than they actually ended up selling them. A significant portion of the 250 stores Rite Aid retained that they planned to sell to Walgreens were in NY.

There is not always a rhyme or reason to what Walgreens decided to take or not take, in these states where some stores remained with Rite AId. Some states it was very clear- like the South- Rite Aid was exiting entirely, period; other states were off limits because Rite Aid wasn't agreeing to selling stores in those states (PA, MI, OR, WA, CA). Other states were basically a free for all where Walgreens got to take whatever they wanted and Rite Aid got left with scraps (NY... and various others back east). Others were spots where Walgreens obviously wanted everything but the FTC somehow made that not happen (CO and ID).