Rite Aid closing at least 63 stores

[Romr123]

The store losses in Michigan still seem to be relatively minimal--onesies and twosies out in the second ring suburbs and exurbs which aren't materially reducing coverage. I still wonder if there is a breakup whether Drug Mart in Ohio might take on Toledo and all of Michigan.

[Super S]

19 additional closures were announced today:
~ttps://www.reddit.com/r/RiteAid/comments/18se3 ... _closures/

Looks like the last store in the center of downtown Philadelphia, previously a 24 hour store, is closing...

Also the Bartell over by SeaTac Airport that has a Walgreens freestanding in the same parking lot is finally closing. Not sure how that happened. Amazing it lasted this long. There was a situation like that involving a Rite Aid somewhere in Salt Lake City suburbs too; of course that was great when Walgreens took the stores over, that was an easy Rite Aid closure.

I am surprised by the closing in Vancouver, WA. The location was possibly the last new build announced by PayLess, and although it opened as Rite Aid, a sign that said "Future Home of PayLess Drug" remained up during construction in 1997-1998, during which Rite Aid acquired PayLess, and is a very visible, high traffic corner at 136th & Mill Plain. There is a strip mall Walgreens across the street that was acquired from Hi-School Pharmacy, and a Safeway on one corner that at one point was earmarked for closure a couple years back but remains open.

This will leave only one Rite Aid in Vancouver, at 2800 NE 162nd Ave. It is a newer, freestanding building. The next closest locations in Washington are the two stores in Longview and Kelso.

[ClownLoach]

19 additional closures were announced today:
~ttps://www.reddit.com/r/RiteAid/comments/18se3 ... _closures/

Looks like the last store in the center of downtown Philadelphia, previously a 24 hour store, is closing...

Also the Bartell over by SeaTac Airport that has a Walgreens freestanding in the same parking lot is finally closing. Not sure how that happened. Amazing it lasted this long. There was a situation like that involving a Rite Aid somewhere in Salt Lake City suburbs too; of course that was great when Walgreens took the stores over, that was an easy Rite Aid closure.

I am surprised by the closing in Vancouver, WA. The location was possibly the last new build announced by PayLess, and although it opened as Rite Aid, a sign that said "Future Home of PayLess Drug" remained up during construction in 1997-1998, during which Rite Aid acquired PayLess, and is a very visible, high traffic corner at 136th & Mill Plain. There is a strip mall Walgreens across the street that was acquired from Hi-School Pharmacy, and a Safeway on one corner that at one point was earmarked for closure a couple years back but remains open.

This will leave only one Rite Aid in Vancouver, at 2800 NE 162nd Ave. It is a newer, freestanding building. The next closest locations in Washington are the two stores in Longview and Kelso.

I really have to question if their real estate consultants are going too far in pressing for concessions. No reason whatsoever to give in if you're a landlord in a growing area, an area without enough retail space, etc. And moreover some of these landlords with better quality space in growing markets probably had the decision made easy for them as they surely received phone calls from interested retailers who probably said "hey if that Rite Aid must happens to close we have a letter of intent in the mail for $X psf for that site, give us a call if anything happens." At that point, unless the prospective replacement tenant wants a fortune in landlord contribution, why not let Rite Aid take themselves out of the picture when someone is lined up to pay more?

Worse, I must ask the bigger question: is Rite Aid viable at all anymore if they're unable to keep good stores in good areas open unless they can get a massive rent break? If these stores are really going to operate in the red at current rents when they're pretty much all on older, mature leases then there is something else very wrong with the business model that must be solved and fast. The last CEO's drastic cut backs of merchandise assortment, limited bargains, and price increases clearly were a recipe for sales disaster but do they have the right people, the right vendors, the right strategy lined up to turn the ship around? Or do they intend to continue to operate the stores in the same manner, not restore the assortment, etc. even though that is one of the main factors that led to the bankruptcy (along with the known issues of the opioid suits and insurance reimbursement problems)? If they have not thought through changes to assortment, product promotion and pricing yet then they are going to be in a world of hurt.

Vancouver, WA is blowing up and should be a market where they're focused on 100% retention of existing sites plus adding more. Real Estate there is still shockingly hot, unfortunately I got priced out of the market several years ago. When you can unequivocally say that you had to buy a California home because that part of Washington was no longer affordable, that is saying something... Homes we saw under construction were being advertised at $700K before models were built and they went on sale; by the time the first phase was available they were $900K and 2nd phase was $1.1M. They ended at $1.4M and we are talking about a 18 month window. The new expansion is also $1.4M and pretty much all spoken for, a $700K swell of appreciation in less than two years. Every developer has long waiting lists and people walking in unsolicited with cashiers checks for deposits. In the same time frame the part of SoCal we landed in basically appreciated about $100K to $150K per home, and are priced about $600K less for an equivalent home in comparable quality neighborhood. Five years ago, a similar home would be $450K in Vancouver area and $700K in the Inland Empire of California, now it's $1.2M in Vancouver vs $800K in the Inland Empire. $1.4M if it's brand new as they're still carrying a significant premium for new builds. Fantastic place to live as you've got the tax savings offered in Washington state coupled with being across the river from sales tax free Oregon for your big shopping.

[babs]

19 additional closures were announced today:
~ttps://www.reddit.com/r/RiteAid/comments/18se3 ... _closures/

Looks like the last store in the center of downtown Philadelphia, previously a 24 hour store, is closing...

Also the Bartell over by SeaTac Airport that has a Walgreens freestanding in the same parking lot is finally closing. Not sure how that happened. Amazing it lasted this long. There was a situation like that involving a Rite Aid somewhere in Salt Lake City suburbs too; of course that was great when Walgreens took the stores over, that was an easy Rite Aid closure.

I am surprised by the closing in Vancouver, WA. The location was possibly the last new build announced by PayLess, and although it opened as Rite Aid, a sign that said "Future Home of PayLess Drug" remained up during construction in 1997-1998, during which Rite Aid acquired PayLess, and is a very visible, high traffic corner at 136th & Mill Plain. There is a strip mall Walgreens across the street that was acquired from Hi-School Pharmacy, and a Safeway on one corner that at one point was earmarked for closure a couple years back but remains open.

This will leave only one Rite Aid in Vancouver, at 2800 NE 162nd Ave. It is a newer, freestanding building. The next closest locations in Washington are the two stores in Longview and Kelso.

This just shows Rite Aid isn't interested in being around long-term. One store doesn't make them a player in the Clark County market. Should easily be a 8+ store market, At one time they owned the Portland Vancouver RX market. Not anymore. My guess they come out of BK, float around for a few years until they sell out or close down the remaining stores because they are no longer a competitive chain.

[ClownLoach]

19 additional closures were announced today:
~ttps://www.reddit.com/r/RiteAid/comments/18se3 ... _closures/

Looks like the last store in the center of downtown Philadelphia, previously a 24 hour store, is closing...

Also the Bartell over by SeaTac Airport that has a Walgreens freestanding in the same parking lot is finally closing. Not sure how that happened. Amazing it lasted this long. There was a situation like that involving a Rite Aid somewhere in Salt Lake City suburbs too; of course that was great when Walgreens took the stores over, that was an easy Rite Aid closure.

I am surprised by the closing in Vancouver, WA. The location was possibly the last new build announced by PayLess, and although it opened as Rite Aid, a sign that said "Future Home of PayLess Drug" remained up during construction in 1997-1998, during which Rite Aid acquired PayLess, and is a very visible, high traffic corner at 136th & Mill Plain. There is a strip mall Walgreens across the street that was acquired from Hi-School Pharmacy, and a Safeway on one corner that at one point was earmarked for closure a couple years back but remains open.

This will leave only one Rite Aid in Vancouver, at 2800 NE 162nd Ave. It is a newer, freestanding building. The next closest locations in Washington are the two stores in Longview and Kelso.

This just shows Rite Aid isn't interested in being around long-term. One store doesn't make them a player in the Clark County market. Should easily be a 8+ store market, At one time they owned the Portland Vancouver RX market. Not anymore. My guess they come out of BK, float around for a few years until they sell out or close down the remaining stores because they are no longer a competitive chain.

Their post BK plan as revealed by the various landlords is interesting; they are demanding not only aggressive rent reductions but also a very specific demand that landlords assume responsibilities for the buildings for at least the 5 years after emergence from bankruptcy. So it is clearly their intent to slash expenses as much as possible to dramatically accelerate cash flow. Rite Aid is going to become extremely profitable under this plan even if they're leaving money on the table with too many closed stores. Clearly the new bank-based owners want this company to be wildly successful so they can IPO it or sell it in 5 years after looting the cash flow and increasing the market value many times what they're paying to take over.

The concern I have is that after a certain point they're going to be too thin in certain markets and have to retreat entirely through the bankruptcy, which is what we saw with the entire Tahoe market and points beyond. If the real estate people are too aggressive then they will have to leave good stores behind as well, possibly even stores where the landlord was willing to concede but due to other closures it was not worth staying as a one store market. And as I explained earlier there is no discussion so far and no visible actions taken to restore customer faith in the brand, nor is there any discussion of how they're going to fix the merchandise assortment broken under the last CEO.

So obviously they intend to be very profitable and I suspect a growth company as well if they can secure new sites under these very good terms (low rent and no repair costs for 5 years). And obviously the owners intend to get a big return on the investment of their new purchase either through an outright sale in 5 years or so, or a successful IPO. So the financial side of the new business plan is solid, although rather obvious, but the operational side of the business plan is questionable.

[HCal]

I really have to question if their real estate consultants are going too far in pressing for concessions. No reason whatsoever to give in if you're a landlord in a growing area, an area without enough retail space, etc. And moreover some of these landlords with better quality space in growing markets probably had the decision made easy for them as they surely received phone calls from interested retailers who probably said "hey if that Rite Aid must happens to close we have a letter of intent in the mail for $X psf for that site, give us a call if anything happens." At that point, unless the prospective replacement tenant wants a fortune in landlord contribution, why not let Rite Aid take themselves out of the picture when someone is lined up to pay more?

I imagine this may be very location-dependent, but overall, the US is known to be "over-stored" and has far more retail space than necessary. Just look at how many former Kmart spaces are still sitting empty. Some have been put to non-retail use (storage facilities or Amazon warehouse), but that only works for a big box store, not a spot in a strip mall. A Rite Aid is too small for a supermarket, and CVS/Walgreens aren't opening new stores, so who is going to take all these former Rite Aid spaces... Dollar Tree or Spirit Halloween?

[storewanderer]

I really have to question if their real estate consultants are going too far in pressing for concessions. No reason whatsoever to give in if you're a landlord in a growing area, an area without enough retail space, etc. And moreover some of these landlords with better quality space in growing markets probably had the decision made easy for them as they surely received phone calls from interested retailers who probably said "hey if that Rite Aid must happens to close we have a letter of intent in the mail for $X psf for that site, give us a call if anything happens." At that point, unless the prospective replacement tenant wants a fortune in landlord contribution, why not let Rite Aid take themselves out of the picture when someone is lined up to pay more?

I imagine this may be very location-dependent, but overall, the US is known to be "over-stored" and has far more retail space than necessary. Just look at how many former Kmart spaces are still sitting empty. Some have been put to non-retail use (storage facilities or Amazon warehouse), but that only works for a big box store, not a spot in a strip mall. A Rite Aid is too small for a supermarket, and CVS/Walgreens aren't opening new stores, so who is going to take all these former Rite Aid spaces... Dollar Tree or Spirit Halloween?

These landlords... seem to think they can re-tenant a lot of these spaces. I'd argue the average vacant Rite Aid is in exponentially better condition and far closer to "tenant improvement start ready" for a single tenant or two than the average vacant Kmart which is too big for any one of the growing tenants I cite below and needs significant work to be divided up before the new tenants can even start doing improvements. Then when you split a Kmart into 5 pieces you deal with arguments about what tenant goes where in the building, etc.

There are a lot of candidates who seem to actively be opening stores at the present time. Marshalls/TJ Maxx, Ross, Sprouts, Dollar Tree, Grocery Outlet, Aldi, Boot Barn, Harbor Freight, Petco, Auto Zone, Advance Auto, O'Reilly, Ace Hardware... out west I do not see issues filling these 20k-30k square foot Rite Aid boxes. Sadly the landlords must agree with me and this is why so many were willing to let Rite Aid go.

Back east the 12k square foot boxes may be a bit tougher to get another decent chain retailer in, but there are other options for the buildings; locally owned businesses, thrift stores, medical facilities, etc...

[storewanderer]

Their post BK plan as revealed by the various landlords is interesting; they are demanding not only aggressive rent reductions but also a very specific demand that landlords assume responsibilities for the buildings for at least the 5 years after emergence from bankruptcy. So it is clearly their intent to slash expenses as much as possible to dramatically accelerate cash flow. Rite Aid is going to become extremely profitable under this plan even if they're leaving money on the table with too many closed stores. Clearly the new bank-based owners want this company to be wildly successful so they can IPO it or sell it in 5 years after looting the cash flow and increasing the market value many times what they're paying to take over.

The concern I have is that after a certain point they're going to be too thin in certain markets and have to retreat entirely through the bankruptcy, which is what we saw with the entire Tahoe market and points beyond. If the real estate people are too aggressive then they will have to leave good stores behind as well, possibly even stores where the landlord was willing to concede but due to other closures it was not worth staying as a one store market. And as I explained earlier there is no discussion so far and no visible actions taken to restore customer faith in the brand, nor is there any discussion of how they're going to fix the merchandise assortment broken under the last CEO.

So obviously they intend to be very profitable and I suspect a growth company as well if they can secure new sites under these very good terms (low rent and no repair costs for 5 years). And obviously the owners intend to get a big return on the investment of their new purchase either through an outright sale in 5 years or so, or a successful IPO. So the financial side of the new business plan is solid, although rather obvious, but the operational side of the business plan is questionable.

What I am wondering is due to all these closures will they still have too much overhead to be profitable? Like, their distribution network, their corporate structure, the costs of that spread among fewer stores, will it make sense?

Will their product costs rise due to buying less/being a smaller chain? Will terms with insurance companies get worse due to them being smaller and being in a weaker negotiating position for reimbursements?

Will all of the closures that kicked out lower wage/less senior employees and replaced them with higher wage/more senior employees cause the labor expense structure to rise so much in the stores that are left that the labor rise will have an impact (should be at least partially offset by the efficiency of more tenured employees).

They are exiting a LOT of small town type markets. I don't understand what kind of market they want to be in going forward. They clearly don't want to be a major player or even a secondary player in big central areas of major cities which is probably a wise move as they were never dominant in big cities in the first place, just sort of there, usually being seriously outperformed by CVS or Walgreens with larger/better located downtown stores. They've closed stores in declining suburb type neighborhoods and some in better growing areas as well. But the closures that floor me the most recently especially the past few months are closures of rural stores. Historically their rural store base has been extremely stable with almost no closures. This development is the one I find most troubling.

The number of pharmacies they only open Monday-Friday 9 AM to 6 PM in these rural markets is troubling and I seem to keep seeing those stores closing. I've said it before but I think they are killing themselves... by not being open. If Wal Mart can open a rural pharmacy 7 days a week and stay open until 7 or 8 PM in the year 2022 and 2023 and 2024 Rite Aid needs to make it happen too.

[Super S]

19 additional closures were announced today:
~ttps://www.reddit.com/r/RiteAid/comments/18se3 ... _closures/

Looks like the last store in the center of downtown Philadelphia, previously a 24 hour store, is closing...

Also the Bartell over by SeaTac Airport that has a Walgreens freestanding in the same parking lot is finally closing. Not sure how that happened. Amazing it lasted this long. There was a situation like that involving a Rite Aid somewhere in Salt Lake City suburbs too; of course that was great when Walgreens took the stores over, that was an easy Rite Aid closure.

I am surprised by the closing in Vancouver, WA. The location was possibly the last new build announced by PayLess, and although it opened as Rite Aid, a sign that said "Future Home of PayLess Drug" remained up during construction in 1997-1998, during which Rite Aid acquired PayLess, and is a very visible, high traffic corner at 136th & Mill Plain. There is a strip mall Walgreens across the street that was acquired from Hi-School Pharmacy, and a Safeway on one corner that at one point was earmarked for closure a couple years back but remains open.

This will leave only one Rite Aid in Vancouver, at 2800 NE 162nd Ave. It is a newer, freestanding building. The next closest locations in Washington are the two stores in Longview and Kelso.

This just shows Rite Aid isn't interested in being around long-term. One store doesn't make them a player in the Clark County market. Should easily be a 8+ store market, At one time they owned the Portland Vancouver RX market. Not anymore. My guess they come out of BK, float around for a few years until they sell out or close down the remaining stores because they are no longer a competitive chain.

The funny part about Rite Aid is that, in Vancouver, they never really expanded far from the locations they acquired from PayLess. They had plans at one point for a replacement store in Hazel Dell, but instead closed the old location with no replacement (current Ross) The original Orchards store (now a Bi-Mart) was replaced with a new build PayLess in a strip mall nearby in the mid-90s, which closed (the 162nd location might have replaced this one but I am not 100% sure) It seems like there were once plans for a few more Rite Aid locations that were never built. Meanwhile, Walgreens really took off once they bought the Hi-School locations.

I will add that when Rite Aid first took over PayLess, they gained a reputation at first of messing up prescriptions, and at the time people did not embrace their loyalty program, which was not commonplace at that point (even Safeway did not have one yet) and I know they struggled for a while.

[ClownLoach]

I really have to question if their real estate consultants are going too far in pressing for concessions. No reason whatsoever to give in if you're a landlord in a growing area, an area without enough retail space, etc. And moreover some of these landlords with better quality space in growing markets probably had the decision made easy for them as they surely received phone calls from interested retailers who probably said "hey if that Rite Aid must happens to close we have a letter of intent in the mail for $X psf for that site, give us a call if anything happens." At that point, unless the prospective replacement tenant wants a fortune in landlord contribution, why not let Rite Aid take themselves out of the picture when someone is lined up to pay more?

I imagine this may be very location-dependent, but overall, the US is known to be "over-stored" and has far more retail space than necessary. Just look at how many former Kmart spaces are still sitting empty. Some have been put to non-retail use (storage facilities or Amazon warehouse), but that only works for a big box store, not a spot in a strip mall. A Rite Aid is too small for a supermarket, and CVS/Walgreens aren't opening new stores, so who is going to take all these former Rite Aid spaces... Dollar Tree or Spirit Halloween?

These landlords... seem to think they can re-tenant a lot of these spaces. I'd argue the average vacant Rite Aid is in exponentially better condition and far closer to "tenant improvement start ready" for a single tenant or two than the average vacant Kmart which is too big for any one of the growing tenants I cite below and needs significant work to be divided up before the new tenants can even start doing improvements. Then when you split a Kmart into 5 pieces you deal with arguments about what tenant goes where in the building, etc.

There are a lot of candidates who seem to actively be opening stores at the present time. Marshalls/TJ Maxx, Ross, Sprouts, Dollar Tree, Grocery Outlet, Aldi, Boot Barn, Harbor Freight, Petco, Auto Zone, Advance Auto, O'Reilly, Ace Hardware... out west I do not see issues filling these 20k-30k square foot Rite Aid boxes. Sadly the landlords must agree with me and this is why so many were willing to let Rite Aid go.

Back east the 12k square foot boxes may be a bit tougher to get another decent chain retailer in, but there are other options for the buildings; locally owned businesses, thrift stores, medical facilities, etc...

I think the Rite Aid locations are going to be harder to get replacement tenants for than one might think. Many of these larger stores still lack proper loading docks where a semi can back in at floor level. Many tenants who want a 20K-30K box won't accept this, and it isn't easy to add especially if the space is not there. The drugstores don't mind these boxes, but I've worked for several chains that would not touch those sites. Most older centers have narrower alleyways etc. that would not accommodate the addition of proper docks. The addition of a dock well is massive, it's an engineering process that prohibits building operations in many cases for such a small facility, and the costs are so high that the site is not worth it. Many former Thrifty sites like that.