Rite Aid closing at least 63 stores

ClownLoach
Diamond Member
Diamond Member
Posts: 441
Joined: April 4th, 2016, 10:55 pm
Has thanked: 3 times
Been thanked: 105 times
Status: Offline

Re: Rite Aid closing at least 63 stores

Post by ClownLoach »

storewanderer wrote: May 13th, 2022, 12:11 am
ClownLoach wrote: May 12th, 2022, 11:15 pm
storewanderer wrote: May 12th, 2022, 9:55 pm I wonder how much will be wasted in legal fees to defend their right to use the font in the new logo.
https://www.law.com/thelegalintelligenc ... -makeover/

Not a great use of funds....

New logo was a mistake for a company that didn't have money to spend on it. And now this? And that Humana issue? This type of misuse of funds did not happen when Bob Miller was around and finances were very tight. This new management seemed oblivious to the fragile finances of Rite Aid throwing money away on a useless new logo like this.

I can only imagine the cost if they have to replace all of the signs. I am sure the company suing over this has computed the cost, which is easily in the millions, and will ask for just a little less than that to "license" the font. Talk about being held over the barrel. I'd suggest they get all of their payments up front though...
I refuse to believe this many leases are up. I refuse to believe they're writing checks to sever leases. And I am sure there are more problems with other insurers owed money because I can't imagine a situation where the pharmacists would know to only bilk Humana. I just think that they're going to close everything they want closed, fail to write the lease termination checks, and go right to a Chapter 11 hoping that they can just cancel the leases, get a prepackaged finance plan to restructure the debt, and most importantly avoid any interest in the estate from liquidation firms who could bid to put down the rest of the chain. The empty aisles and poor in stocks are probably married to empty warehouses - so when the Gordon Brothers, Hilco and others go look at stores they're going to not be interested in bidding because they don't see any merchandise to sell. Then how much are you willing to bet they've got a hand picked private equity buyer waiting for them on the other side of Chapter 11?

It doesn't take a genius to figure out they're setting up for a filing simply because they are closing too many stores coupled with money problems. Their competitors like CVS and Walgreens can close hundreds of stores for figurative pennies because they are so profitable. But Rite Aid is too deep in debt to work this out without a court restructuring. I've seen better companies with lesser financial problems close out a major round of closures with a Chapter 11... I think it's inevitable.
I am not sure exactly how much product they are ordering from Supervalu/UNFI at this point to alleviate supply challenges. We see that Essential Everyday food showing up to replace the old Rite Aid Big Win private label in a number of grocery categories (but not the whole category) and they've had Wild Harvest for a while now as an intended program (though the pet food seems to be getting discontinued). But it is entirely possible they are ordering other stuff from Supervalu/UNFI too.

If they are at 2,200 stores and leases are 10 year terms (seems typical for them) then that is 220 stores per year coming up for lease. Of course a few stores are owned, a few more aren't on 10 year leases, a few are so good they won't close them (or will they...?), so I think 145 stores or whatever they are closing may come out about right as to leases ending. I don't see much rhyme or reason to what is being closed aside from big city/assumed high theft units. Stores are being kept open that do even less business than some of the stores closing in CA.

The system the pharmacies use to charge insurance is automated. I don't think the pharmacists have the ability to bilk the insurance in such a pervasive manner as what happened here with Humama. Something was wrong in the system. Really wrong.
The problems are pretty clearly explained here though. It seems about half of these closures are what appear to be healthy stores - they could be at lease end but seems to me like they are just closing for the sake of quickly cashing out all the merchandise in liquidation to help with the company cash flow even if they're going to regret the loss of the store later on. It's all about now, and that usually happens when a company is in a money crisis and is forced to make short term decisions that will spell doom long term. And I know they can't selectively overcharge one insurer - that is why I'm questioning the entire company's billing. Those stories generally are kept pretty quiet and I was surprised that A) the story leaked out of the $123M payback, and B) that there are snippets being printed here and there about many more of these billing disputes involving major drugstore chains and other insurers. I just can't imagine that Humana was the only one overbilled and that is where the problem lies - the unknown future liabilities of a company that barely breaks even.

I just don't see how they address the $200M a year of interest expenses on the debt service that will clearly never be retired and will only roll over to a higher amount with rising interest rates - plus the obligation to spend $200M a year in remodeling. I've never heard of such a requirement for a company and clearly it's money getting wasted seeing so many beautiful looking recently remodeled and even recently resigned stores getting the ax. The statement from management about spending $700M to rebrand the company, which includes interior remodels as well as the signage outside, seems to be their way of better using the required expenditure of $200M a year, but the best possible expenditure is not to do any of this work at all because the majority of their stores are in better condition than the competition already and don't need additional work. Reading of stores with the most recent "Wellness" prototype fully implemented with luxury tile floors and the expensive led can lights everywhere being considered for remodel to something completely new again is just wasteful and shows that whatever agreement was made is harmful to the company and should be severed. Unfortunately that probably means bankruptcy to restructure it, and with the increasing interest rates it might not even be viable because the higher interest rate could theoretically be $200M more per year delivering no savings and then no future remodels or upgrades either which turns the stores into faster depreciating assets. That's probably why they were forced into the spend in the first place but what is a more realistic number?

We all know if it gets liquidated later and Walgreens or CVS pick up these fancy stores in the process they'll still go in and gut them to remove all the nice details like the signage, fancy lighted fixtures and flooring because they just don't do those things and have no interest in paying for them. Sav-On had a nice new prototype that had beautiful signage that was very contemporary and had a great Southern California feel with tropical inspired signage with palm trees, a expensive looking tile floor, fancy spotlights on endcaps very similar to the most recent Target remodels, etc. and had a few units remodeled to it right when the CVS acquisition occurred. It all went in the trash! Fancy lighting removed and strip fixtures with one bulb put in to save energy, fancy floor replaced with stick on carpet tile, etc. And that's exactly what CVS would do with these "pretty" stores, so I'm not exactly sure how remodeling them constantly is even "maintaining the value of the asset" anymore.
mbz321
Diamond Member
Diamond Member
Posts: 426
Joined: March 11th, 2010, 7:52 pm
Has thanked: 69 times
Been thanked: 21 times
Status: Offline

Re: Rite Aid closing at least 63 stores

Post by mbz321 »

norcalriteaidclerk wrote: May 12th, 2022, 1:20 am
Don't know how many Pennsylvania stores have closed within the past six months,but either they have been less publicized or the happening at a lower rate than in California or NYC.
There have definitely been some quiet closures here and there. Just yesterday I read on a local subreddit that a location in Quakertown, Bucks County is closing (former Eckerd?). Apparently, the store was 'Union' as a current employee was asking for other places hiring in the area, as they weren't allowed a transfer to one of the two other locations RA has in town, assuming both are non-union.
ClownLoach
Diamond Member
Diamond Member
Posts: 441
Joined: April 4th, 2016, 10:55 pm
Has thanked: 3 times
Been thanked: 105 times
Status: Offline

Re: Rite Aid closing at least 63 stores

Post by ClownLoach »

HCal wrote: May 13th, 2022, 12:46 am I just read that last month Rite Aid rejected a buyout for a 56% premium over their current valuation. The buyers threatened a hostile takeover but I don't know if they are going to actually try.

This means that either management has a plan they are really confident in, or they are just being foolish and stubborn.
The issue was that the buyer was a small firm nobody had ever heard of and they clearly did not have the credit necessary to restructure the massive debt which would be a requirement of such an acquisition. They had no more ability to take on billions in debt than you or I would personally. Therefore it was really nothing more than a publicity stunt.
ClownLoach
Diamond Member
Diamond Member
Posts: 441
Joined: April 4th, 2016, 10:55 pm
Has thanked: 3 times
Been thanked: 105 times
Status: Offline

Re: Rite Aid closing at least 63 stores

Post by ClownLoach »

storewanderer wrote: May 12th, 2022, 9:55 pm I wonder how much will be wasted in legal fees to defend their right to use the font in the new logo.
https://www.law.com/thelegalintelligenc ... -makeover/

Not a great use of funds....

New logo was a mistake for a company that didn't have money to spend on it. And now this? And that Humana issue? This type of misuse of funds did not happen when Bob Miller was around and finances were very tight. This new management seemed oblivious to the fragile finances of Rite Aid throwing money away on a useless new logo like this.

I can only imagine the cost if they have to replace all of the signs. I am sure the company suing over this has computed the cost, which is easily in the millions, and will ask for just a little less than that to "license" the font. Talk about being held over the barrel. I'd suggest they get all of their payments up front though...
I think the entire idea behind the rebranding was that they're required to spend $200M a year on remodeling anyway, so why not have a drawn out strategy and purpose in what they spend so that in 4 years they would have every single store on a similar prototype, matching signage which was legitimately a problem as they had numerous logos in place. I will give them the credit that at least this was management trying to demonstrate that they had a vision for this money spend. But what they really should have been doing is renegotiating that requirement out of the finance agreements to a more reasonable annual amount without restructuring the debt, where a new loan at higher interest rate would just cancel out the entire process. Maybe $50M a year is appropriate for annual remodels? $100M? Just not what they're spending now because again they will eventually wind up remodeling stores that just don't need it at all. I'd rather see more merchandise on the shelves and more payroll spent in the store so they can grow market share. They can have the prettiest fixtures and floors but if the shelves are bare or there is nobody to check out the customer then sales will still be bad and the company will still be at risk of closure.
veteran+
Veteran Member
Veteran Member
Posts: 1045
Joined: January 3rd, 2015, 7:53 am
Has thanked: 942 times
Been thanked: 86 times
Status: Offline

Re: Rite Aid closing at least 63 stores

Post by veteran+ »

ClownLoach wrote: May 12th, 2022, 11:15 pm
storewanderer wrote: May 12th, 2022, 9:55 pm I wonder how much will be wasted in legal fees to defend their right to use the font in the new logo.
https://www.law.com/thelegalintelligenc ... -makeover/

Not a great use of funds....

New logo was a mistake for a company that didn't have money to spend on it. And now this? And that Humana issue? This type of misuse of funds did not happen when Bob Miller was around and finances were very tight. This new management seemed oblivious to the fragile finances of Rite Aid throwing money away on a useless new logo like this.

I can only imagine the cost if they have to replace all of the signs. I am sure the company suing over this has computed the cost, which is easily in the millions, and will ask for just a little less than that to "license" the font. Talk about being held over the barrel. I'd suggest they get all of their payments up front though...
I refuse to believe this many leases are up. I refuse to believe they're writing checks to sever leases where continuous operation is required. And I am sure there are more problems with other insurers owed money because I can't imagine a situation where the pharmacists would know to only bilk Humana. I just think that they're going to close everything they want closed, fail to write the lease termination checks, and go right to a Chapter 11 hoping that they can just cancel the leases, get a prepackaged finance plan to restructure the debt, and most importantly avoid any interest in the estate from liquidation firms who could bid to put down the rest of the chain. The empty aisles and poor in stocks are probably married to empty warehouses - so when the Gordon Brothers, Hilco and others go look at stores they're going to not be interested in bidding because they don't see any merchandise to sell. Then how much are you willing to bet they've got a hand picked private equity buyer waiting for them on the other side of Chapter 11?

It doesn't take a genius to figure out they're setting up for a filing simply because they are closing too many stores coupled with money problems. Their competitors like CVS and Walgreens can close hundreds of stores for figurative pennies because they are so profitable. But Rite Aid is too deep in debt to work this out without a court restructuring. I've seen better companies with lesser financial problems close out a major round of closures with a Chapter 11... I think it's inevitable.
This is why Executives get paid soooooooo much money! All that MBA stuff and experience does not seem to matter with the E-Suite in corporate America. They keep on doing the same things over and over again, expecting different results.

Remember, it's always the fault of Unions, regulations, employees, fickle consumers, etc.

🤷‍♂️🤷‍♂️🤷‍♂️🤷‍♂️🤷‍♂️🤷‍♂️🤷‍♂️🤷‍♂️🤷‍♂️🤷‍♂️🤷‍♂️
marshd1000
Veteran Member
Veteran Member
Posts: 511
Joined: March 2nd, 2009, 1:46 pm
Been thanked: 13 times
Status: Offline

Re: Rite Aid closing at least 63 stores

Post by marshd1000 »

I wonder if Rite Aid should revisit joining up with Albertsons?
norcalriteaidclerk
Silver Member
Silver Member
Posts: 156
Joined: August 22nd, 2010, 1:01 am
Location: 916/279 area code complex
Has thanked: 46 times
Been thanked: 11 times
Contact:
Status: Offline

Re: Rite Aid closing at least 63 stores

Post by norcalriteaidclerk »

marshd1000 wrote:I wonder if Rite Aid should revisit joining up with Albertsons?
Not impossible but highly unlikely with Bob Miller retiring as CEO (he succeeded caretaker Leonard green as RAD CEO circa 2000 after the accounting scandal that ended the involvement of the founding Grass family).

Also, Santa Rosa is down to 2 locations left (Stony Point and Farmers Lane plus peripheral locations in Healdsburg, Sebastopol,and Sonoma) as 1793 Marlow (presumed former thrifty in the Safeway center swc of the guerneville road intersection)just bit the dust.In addition to any windfall from the temporary Stony Point closure(trash fire crept near some back doors enough to trigger sprinklers)being short lived,wonder if tubbs fire years back hurt business by destroying some nearby neighborhoods.

Sent from my SM-G781U using Tapatalk

For your life,Thrifty and Payless have got it.
storewanderer
Valued Contributor
Valued Contributor
Posts: 8607
Joined: February 23rd, 2009, 3:54 pm
Been thanked: 436 times
Contact:
Status: Offline

Re: Rite Aid closing at least 63 stores

Post by storewanderer »

ClownLoach wrote: May 13th, 2022, 7:54 am

I think the entire idea behind the rebranding was that they're required to spend $200M a year on remodeling anyway, so why not have a drawn out strategy and purpose in what they spend so that in 4 years they would have every single store on a similar prototype, matching signage which was legitimately a problem as they had numerous logos in place. I will give them the credit that at least this was management trying to demonstrate that they had a vision for this money spend. But what they really should have been doing is renegotiating that requirement out of the finance agreements to a more reasonable annual amount without restructuring the debt, where a new loan at higher interest rate would just cancel out the entire process. Maybe $50M a year is appropriate for annual remodels? $100M? Just not what they're spending now because again they will eventually wind up remodeling stores that just don't need it at all. I'd rather see more merchandise on the shelves and more payroll spent in the store so they can grow market share. They can have the prettiest fixtures and floors but if the shelves are bare or there is nobody to check out the customer then sales will still be bad and the company will still be at risk of closure.
With regards to the store closures they are not even always doing liquidation sales. Some stores are just closing and items are being packed up and shipped away to stores still open. Some stores are doing very fast 50% off to 75% off everything sales for a few days then still packing a bunch of it up and sending it elsewhere. This isn't like, say, Sears/Kmart where there was a very managed liquidation sale approach (10% off the whole store except maybe 30% off clothing for a good month which was a crazy profitable liquidation model) to maximize profit. This feels more like a give some of it away to make the pack up go faster sort of process. So if their goal is to raise cash via liquidation sale, their process makes no sense.

Walgreens has actually kept many elements of the Rite Aid Wellness interior in the stores they bought. All Walgreens did was go in and re-paint the walls and install Walgreens wall signs. They kept the old shelving, flooring, lighting, counters, etc. CVS would of course do a complete hack job and downscale the place.

Given that they have 2,000 stores and you say you want to remodel a store every 10 years, a drugstore shouldn't cost $1 million to remodel, but that seems to be what their covenant says they need to do- put $1 million into every store every 10 years at 2,000 stores. That is definite overkill. I'd like to see more of that money go to building new stores. Problem is, and man there are a lot of problems, they seem too eager to close their stores even new ones.

Noticed this week Rite Aid has done additional "price cuts" on another block of items throughout the store. This is on top of price cuts previously mentioned here by another poster a month or so ago and covers more categories/items. Odd time to be doing a price cut program in the middle of record inflation. As much as I like to see a price cut program I can't help but question the peculiar timing. The prices aren't a discount by any means but they are lower than most other drug stores everyday pricing. I am not sure how much that matters. Maybe they will run fewer weekly sales going forward but as many Rite Aid sales (buy 1 get 1 free, buy 1 get 1 50% off, etc.) are dependent on the regular retail pricing being high I wonder how this will work. Rite Aid also really needs to end these sale prices of "4 for $5 or $1.79 each" - they do not have enough inventory to support more than about one customer a week coming for 4 units of something. The employees have always been willing to price override however many they have down to the 1.25 in this scenario without issue but not every customer asks for that and not every employee is going to offer that option either.
norcalriteaidclerk
Silver Member
Silver Member
Posts: 156
Joined: August 22nd, 2010, 1:01 am
Location: 916/279 area code complex
Has thanked: 46 times
Been thanked: 11 times
Contact:
Status: Offline

Re: Rite Aid closing at least 63 stores

Post by norcalriteaidclerk »

We can officially stick a fork in 2 more San bernardino county locations:the lone remaining chino location at 12059 central was a legacy thrifty that after getting remodeled into the ra-1 format never got any further capex beyond having updated exterior signs a year or two ago,while 13720 bear valley in victorville(legacy thrifty)was the only strip mall location left in town versus 3 freestanding drive-thru locations(one being a relocation store)and was only remodeled into rite choice decor in the early 2000's and still had late 1990's signage on the building.
For your life,Thrifty and Payless have got it.
storewanderer
Valued Contributor
Valued Contributor
Posts: 8607
Joined: February 23rd, 2009, 3:54 pm
Been thanked: 436 times
Contact:
Status: Offline

Re: Rite Aid closing at least 63 stores

Post by storewanderer »

norcalriteaidclerk wrote: May 14th, 2022, 2:01 pm We can officially stick a fork in 2 more San bernardino county locations:the lone remaining chino location at 12059 central was a legacy thrifty that after getting remodeled into the ra-1 format never got any further capex beyond having updated exterior signs a year or two ago,while 13720 bear valley in victorville(legacy thrifty)was the only strip mall location left in town versus 3 freestanding drive-thru locations(one being a relocation store)and was only remodeled into rite choice decor in the early 2000's and still had late 1990's signage on the building.
There is another Rite Aid at 16120 Bear Valley which looks like an under 10 years old store (like Cameron Park, Tracy, and Roseville Pleasant Grove) and it still has old logo signs and there is a big "FOR LEASE FREESTANDING SHOP SPACE" sign in front of the store in the 2021 Google Maps photo. I hope.... they decided to keep this store now, instead of 13720 Bear Valley... the unit at 19035 Bear Valley (another of those under 10 years old stores) did get new signs. Good looking store base remaining in that area.
Post Reply