Rite Aid Sells All San Francisco Stores

[Alpha8472]

Rite Aid has sold all 7 of their San Francisco stores to Walgreens.
http://www.bizjournals.com/sanfrancisco ... ily86.html

San Francisco is dominated by Walgreens. There is only 1 Longs Drugs in San Francisco and it opened only a short time ago.

I think Rite Aid is slowly giving up. Walgreens now has a virtual monopoly in San Francisco.

Running a drug store in San Francisco has long been a difficult task. There is so much shoplifting that Walgreens locks up many products such as baby formula behind plastic barriers. Also the San Francisco Board of Supervisors outlawed sales of cigarettes in chain drug stores. This ban was a bizarre move, since it punished Walgreens, Rite Aid, and Longs. Supermarkets and independent drug stores were not included in the ban.

[storewanderer]

They aren't allowed to use plastic shopping bags either, they must use paper.

Although I don't think it is a good sign that Rite Aid left San Francisco, I then ask myself this question: "Would you want to do business in San Francisco?" At that point, I have a big quesiton mark pop up. I honestly don't know if it is worth it..

Rite Aid had some good locations there, but a few not so good ones. I think they have already closed a few stores there. Quite a few new Rite Aids in San Francisco in the late 90s that reportedly came with less than favorable lease terms, which may be another reason for these closures.

Most of the expansion done in the late 90s with new stores has been reversed by Rite Aid. The expansions into Reno and Colorado Springs that Rite Aid initiated in the late 90s are gone. The beefing up of Thrifty Payless poor presence in Las Vegas and San Francisco with numerous new late 90s stores is also gone. Makes you wonder.

[Alpha8472]

San Francisco has passed so many laws to make it hard to do business there. The minimum wage in San Francisco has been set to a very high amount. Also businesses with more than a certain number of employees have to provide health care to their employees or pay the city a health care fee.

San Francisco is a city where many people don't have cars, so the many people use drug stores instead of supermarkets. People pay more for items at the drug stores because supermarkets are few and far between without a car.

I think the drug stores are still profitable due to the enormous crowds and dense population. However, all these laws and regulations in San Francisco put a drain on the profits.

Perhaps Walgreens will improve these Rite Aid stores. Rite Aid never spent much on upkeep at their older stores.

[storewanderer]

There is only one former Thrifty open in San Francisco and Rite Aid gutted the interior and remodeled. The Alemany is an old Payless that was rebuilt on the same site, so that is a brand new store. The remaining are stores that Rite Aid opened in the late 90s. I've been into about half of the stores and they are just fine.

Rite Aid is under their standard Union Contract in San Francisco, so I don't think the minimum wage is an issue for them there since that scale is above the minimum wage.

[krogerclerk]

The healthcare law, cigarette ban and plastic bag ban are all directed at the chains. San Francisco has become an expensive city to do business(and live), but is considered to be one of the most desirable in which to live. Why a city the size of Frisco would adopt a stance that is so liberal to the point of being anti-chain, as few independents can afford Frisco's real estate.

Many chains and independents have sold out of SF due to being offered rediculous amounts for their real estate, one of the reasons for a dearth of supermarkets in the city prior to the passage of these laws. Since Rite Aid and the supermarket chains are unionized, the city's minimum wage law and health care benefits laws don't affect the RA and the supermarkets.

[Alpha8472]

Walgreens is also union in San Francisco(and Chicago). Longs Drugs is non-union, but they only have one small store in San Francisco.

[storewanderer]

Walgreens was supposed to take control of these stores during the second half of March, and as of now, they still have not taken control of these stores.

Does anyone know what is going on?

There was no mention of the store sales on their loss report conference call, but they did say they think they can turn their finances around without any "major" asset sales.

[Alpha8472]

Could it be possible that labor unions are giving Rite Aid and Walgreens a hard time?

One option is to sell all of the stuff in the stores and close them down. Fire all of the Rite Aid workers. Then Walgreens will take over the stores and hire brand new workers starting at the lowest possible wage.

If they take over an existing store along with the current employees, they might have to keep the high paid union employees at the same pay rate.

If they are trying to fire all of the Rite Aid employees, there could be considerable resistance from the labor unions.

[romleys]

Could it be an FTC monopoly issue?

[Alpha8472]

I don't think that it is a FTC monopoly issue. Walgreens already had a monopoly in San Francisco already. In San Francisco alone, Walgreens has 59 stores. Rite Aid only has 42 stores in all of the Bay Area.

Seven stores is a very insignificant number. However, labor unions can be quite vocal at the possibility that their employees will be out of work. If those employees lose their jobs, the Union loses all of the union membership dues.