Rite Aid Bankruptcy Speculation

[ClownLoach]

The massive opioid drug lawsuits that competitors like CVS and Walgreens have settled for billions of dollars are now causing analysts to predict the bankruptcy of Rite Aid. This is a very alarming article that makes serious accusations - management hasn't done anything to improve their financial situation, has nobody experienced with financial restructuring, and most importantly has so little confidence in their own company that they don't own much if any of the stock (usually executives own millions of dollars worth of stock as it's usually their primary compensation source). But at least every location has a new logo! (Including hundreds of locations that got a new sign then threw it away when they closed a few months later)

I think it is a good thing they didn't merge with Albertsons years ago....

https://seekingalpha.com/article/461605 ... must_reads

What do you think will happen here when the dust settles? Walgreens is struggling too, but they're not losing $5 a share like Rite Aid. Do we see a major pivot with a company like Walmart coming in and buying out both Walgreens and Rite Aid to make a more viable competitor to CVS with cost savings from being part of Walmart? Or does CVS acquire Rite Aid?

Remember that antitrust laws wouldn't apply in a bankruptcy court sale of stores or the company... The only logical buyers however would need to be companies that have already settled opioid lawsuits without being financially crippled by them which is why I mentioned Walmart. These opioid suits are going to put nearly every pharmacy out of business and leave us with a CVS monopoly...

[norcalriteaidclerk]

Of course a site catering to motley fools aka short sellers would come up with a paywalled diatribe designed to stir up fud.Seeking Alpha is no different from sites like The motley fool and the street,they aren't true financial news sources but rather commentary to 'entertain' stock traders.

That said,my company has no mature debt due until 2025.In fact the CFO is doing everything he can to make the speculation machine eat their own words even as his higher ups aren't exactly the sharpest knives in the drawer.

[storewanderer]

The massive opioid drug lawsuits that competitors like CVS and Walgreens have settled for billions of dollars are now causing analysts to predict the bankruptcy of Rite Aid. This is a very alarming article that makes serious accusations - management hasn't done anything to improve their financial situation, has nobody experienced with financial restructuring, and most importantly has so little confidence in their own company that they don't own much if any of the stock (usually executives own millions of dollars worth of stock as it's usually their primary compensation source). But at least every location has a new logo! (Including hundreds of locations that got a new sign then threw it away when they closed a few months later)

I think it is a good thing they didn't merge with Albertsons years ago....

https://seekingalpha.com/article/461605 ... must_reads

What do you think will happen here when the dust settles? Walgreens is struggling too, but they're not losing $5 a share like Rite Aid. Do we see a major pivot with a company like Walmart coming in and buying out both Walgreens and Rite Aid to make a more viable competitor to CVS with cost savings from being part of Walmart? Or does CVS acquire Rite Aid?

Remember that antitrust laws wouldn't apply in a bankruptcy court sale of stores or the company... The only logical buyers however would need to be companies that have already settled opioid lawsuits without being financially crippled by them which is why I mentioned Walmart. These opioid suits are going to put nearly every pharmacy out of business and leave us with a CVS monopoly...

Regulators seem to like to go after deep pockets and "obvious names." Rite Aid isn't deep pockets and in a lot of regions Rite Aid is quite low on market share below Walgreens, CVS, Wal Mart, and multiple grocery chains. So while they are going to be a target for these lawsuits I don't expect to see eye popping settlement amounts like these states are boasting about getting from Walgreens and CVS.

We also don't know if Rite Aid will be better able to defend itself against these lawsuits due to being lower volume operations that may not have let as much stuff "slip through" as some of these overworked and crazy busy CVS and Walgreens units.

Also I am not sure but the current CFO of Rite Aid worked for Pathmark before Rite Aid. I think A&P bought Pathmark around 2009 which is around when that CFO moved over to Rite Aid. I think Pathmark went through a bankruptcy in the early 2000's. Not sure what his role was if he was there at that time. But there may be some experience.

But if Interest rates don't go down in 2025-2026 so they can refinance, then yes it is probably going to be the end.

[ClownLoach]

Of course a site catering to motley fools aka short sellers would come up with a paywalled diatribe designed to stir up fud.Seeking Alpha is no different from sites like The motley fool and the street,they aren't true financial news sources but rather commentary to 'entertain' stock traders.

That said,my company has no mature debt due until 2025.In fact the CFO is doing everything he can to make the speculation machine eat their own words even as his higher ups aren't exactly the sharpest knives in the drawer.

I try to read around the commentary on all of these pages and just read the facts. Unfortunately there are some issues that I am frankly shocked haven't been addressed yet, especially the debt maturing in 2025. In every debt filled retailer I've worked for they never let anything get within 5 years of maturity before they refinance it so that they wouldn't ever be at risk of insolvency. But you can't lose $5.56 a share in a 90 day period when your shares are only worth $1.59. Yes they are putting a spin on the facts being an investor advice site, but the facts are what they are. I've never heard of a company that large where the executives don't have significant ownership. Most publicly traded require that the executives hold several times their annual salary in shares, and the reason is that they have "skin in the game" so they'll act in the best interest of the company and shareholders. Apparently this isn't the case at Rite Aid, and since these folks do know the future and aren't buying the stock that does tell you something. And I was calling out the issue of opioid suits over a year ago on this board before these speculator sites started saying the same thing. It is an absolute 911 emergency situation at Rite Aid if they don't have a financing deal in hand to refinance the 2025 debts - that should have been done in 2020 at the very latest - and if they don't then they absolutely do need to file for bankruptcy as soon as they can locate restructuring partners or they'll have no chance of survival in their current form.

[storewanderer]

I try to read around the commentary on all of these pages and just read the facts. Unfortunately there are some issues that I am frankly shocked haven't been addressed yet, especially the debt maturing in 2025. In every debt filled retailer I've worked for they never let anything get within 5 years of maturity before they refinance it so that they wouldn't ever be at risk of insolvency. But you can't lose $5.56 a share in a 90 day period when your shares are only worth $1.59. Yes they are putting a spin on the facts being an investor advice site, but the facts are what they are. I've never heard of a company that large where the executives don't have significant ownership. Most publicly traded require that the executives hold several times their annual salary in shares, and the reason is that they have "skin in the game" so they'll act in the best interest of the company and shareholders. Apparently this isn't the case at Rite Aid, and since these folks do know the future and aren't buying the stock that does tell you something. And I was calling out the issue of opioid suits over a year ago on this board before these speculator sites started saying the same thing. It is an absolute 911 emergency situation at Rite Aid if they don't have a financing deal in hand to refinance the 2025 debts - that should have been done in 2020 at the very latest - and if they don't then they absolutely do need to file for bankruptcy as soon as they can locate restructuring partners or they'll have no chance of survival in their current form.

I would argue that part of the problem is back in 2020 we were in the middle of COVID and nobody seemed to know what was going on or what to do and while they could have been trying to renegotiate debt they were busy screwing around with a new logo, new marketing campaign, liquidating a ton of slow moving categories out west without replacing said categories with new items to generate revenue, a new store prototype that is clearly a total loser and they probably knew it even back then when it was first rolled out (due to lack of SKUs), and then trying to integrate that Bartell acquisition. So between COVID and a number of other strategic errors that occurred back around 2020 they clearly missed out on the opportunity to be pro-active about getting the debt renegotiated.

Before the Bartell acquisition they were actually paying down debt each quarter.

Now time flies and here we are 3 years later and since 2020 the results of the company have really deteriorated the past 3 years, but nothing was done pro-actively and mistakes were made back in 2020 that caused irreparable damage. So now they are up against a wall on what to do. This is a bad spot to be in for sure, unless rates go down, this will end as a very tasty comp buffet for CVS and Walgreens.

Other than the CFO, after that CEO Standley left/was forced out due to the situation with the Albertsons and then Walgreens merger, it seems like management has been a bit of a revolving door lacking people staying long and lacking people who really understand Rite Aid. Standley for all anyone can say turned the thing around operationally, and had a Walgreens offer in hand to bring $10/share (before reverse split) to shareholders then embarrassed himself with the awful offer from Albertsons for like $2/share (before reverse split). Back to the management topic, there isn't a pool to promote from within from, and the other large chain drugstores also seem to have some turnover in management, so that is another issue not working in their favor. The only one there who has been there long enough to really understand the company and situation is that CFO. But there are only so many rabbits you can pull out of the hat and Rite Aid's ability to keep finding rabbits continues to be impressive. We may be about to see the end of the line in 2025 but many people were calling this to happen back in 2000.

What I wonder is where they'd be had they not taken Eckerd on (which derailed what seemed like performance improvements back under Mary Sammons) and then where they'd be had they not taken Bartell over (which was really bad timing and I don't think they had the right people in place at that point to properly integrate). My suspicion is had they avoided those two acquisitions they could barely afford, they'd be in a much better place today with less debt and stronger finances. At this point they barely have any of the Eckerd junk they bought left (CVS got all the good Eckerd parts), now Walgreens is dealing with that, and they are also having issues.

[BillyGr]

What I wonder is where they'd be had they not taken Eckerd on (which derailed what seemed like performance improvements back under Mary Sammons) and then where they'd be had they not taken Bartell over (which was really bad timing and I don't think they had the right people in place at that point to properly integrate). My suspicion is had they avoided those two acquisitions they could barely afford, they'd be in a much better place today with less debt and stronger finances. At this point they barely have any of the Eckerd junk they bought left (CVS got all the good Eckerd parts), now Walgreens is dealing with that, and they are also having issues.

Well, in this area, two of the closest four Rite Aid stores left were former Eckerd locations, and in both cases they kept those stores for some reason (as neither is near an existing Walgreens), while the two original Rite Aid locations they kept were for that reason (one has a Walgreens on the opposite corner, the other just up the street).

So, there were obviously some that did well enough to warrant keeping them without being forced to do so.

[veteran+]

Perhaps Amazon could weigh in.............................




Just kidding!

[marshd1000]

Since Loblaws is re-entering the US by opening a T&T Asian Market in Washington State, I wonder if they would take on Rite Aid and Bartell Drugs? They do own Shoppers Drug Mart in Canada. Interesting side note, Bartell Drugs entered Snohomish County in the 1980's by buying the few Shoppers Drug Mart locations there!

[babs]

Since Loblaws is re-entering the US by opening a T&T Asian Market in Washington State, I wonder if they would take on Rite Aid and Bartell Drugs? They do own Shoppers Drug Mart in Canada. Interesting side note, Bartell Drugs entered Snohomish County in the 1980's by buying the few Shoppers Drug Mart locations there!

There is a little reason for anyone to buy Rite Aid. Perhaps CVS might buy their stores in Oregon and Washington to get a better foothold. I could see CVS buying the Bartell stores. Other than that, the only thing of value they have are the pharmacy files, which a nearby competitor will buy. Let's not perpetuate the Amazon, Walmart, Albertsons, Kroger, etc... will buy Rite Aid. Not happening.

[Romr123]

Since Loblaws is re-entering the US by opening a T&T Asian Market in Washington State, I wonder if they would take on Rite Aid and Bartell Drugs? They do own Shoppers Drug Mart in Canada. Interesting side note, Bartell Drugs entered Snohomish County in the 1980's by buying the few Shoppers Drug Mart locations there!

Michigan/Toledo and Buffalo NY Rite Aid could be a tastily dense acquisition for Loblaw. Shoppers is a well run organism that was pretty well sucked up into the Loblaw ecosystem. It wouldn't be a gigantic leap into these adjacent areas (media is even shared between the markets)...there's even still a RA in Sault Ste Marie, MI. Shoppers operates in both corporate (Ontario corporate pharmacy-Shoppers) and franchised-pharmacy (Quebec-Pharmaprix)models, so has some level of institutional flexibility, plus their model is quite similar to the US chains (expensive regular prices; promotional prices on consumables rotating weekly).