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.storewanderer wrote: ↑May 13th, 2022, 12:11 amI 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.ClownLoach wrote: ↑May 12th, 2022, 11:15 pmI 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?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...
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.
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.
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.