Rite Aid closing at least 63 stores

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Re: Rite Aid closing at least 63 stores

Post by storewanderer »

ANOTHER "store of the future" closing - along with 13 additional east coast stores announced 4/16 in bankruptcy docket. 1624 Laskin Road in Virginia Beach.

I find it odd they had so many of these in Virginia Beach. Also how they seem to be closing so many stores there. Wondering if this was a struggling market and they tried these "store of the future" remodels there to try and save it or what.
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Re: Rite Aid closing at least 63 stores

Post by reymann »

storewanderer wrote: April 17th, 2024, 12:34 am Reading on Reddit that Rite Aid is laying off employees in the stores, it appears the unionized CA Stores are getting hit by this.

Not sure what the union is doing... I guess the same thing it has been for the past 4 years when some locals have been working without a contract... at least they collect dues.

If the unionized Rite Aid employees get laid off or get too few hours in theory can they go get a job at a unionized grocery store chain and at least hold on to their union pension etc. (I assume they'd lose seniority and obviously wage since the grocery stores are a completely different contract/wage scale) despite the grocers being on different union contracts? Or are these employees under the Rite Aid UFCW contract basically screwed if they aren't working for Rite Aid?

If this ends up being true, I expect the CA attorney general to start investigating Rite Aid which could mean game over for them in California.
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Re: Rite Aid closing at least 63 stores

Post by buckguy »

Here's a list of the most recent closures. https://www.fastcompany.com/91091797/ri ... 024-update. I'm guessing they couldn't re-negotiate leases because the locations are such a mix of urban, suburban, small town in the middle of nowhere, etc., although no place jumps out as upscale. None of the places I could recognize would be considered "prime" locations, but some are probably significant local business districts. The one very small town I spotted (Waverly, Ohio) has a Walmart, a Kroger, and chain that seems to specialize in small Appalachian towns. they'd probably need a cheap lease to compete in some place like that.
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Re: Rite Aid closing at least 63 stores

Post by ClownLoach »

buckguy wrote: April 17th, 2024, 5:07 am Here's a list of the most recent closures. https://www.fastcompany.com/91091797/ri ... 024-update. I'm guessing they couldn't re-negotiate leases because the locations are such a mix of urban, suburban, small town in the middle of nowhere, etc., although no place jumps out as upscale. None of the places I could recognize would be considered "prime" locations, but some are probably significant local business districts. The one very small town I spotted (Waverly, Ohio) has a Walmart, a Kroger, and chain that seems to specialize in small Appalachian towns. they'd probably need a cheap lease to compete in some place like that.
This matches the list discussed here a few weeks ago as it includes a store I have been mocking for a long time, the newest store in the organization. It appears that this latest wave is only now being reported on by the news media.

I agree this is probably the final list of stores where the company and landlords couldn't come to an agreement on a rent reduction.

I still am expecting one final large wave of closures, and that will be a "cleanup" that may include stores that were previously drafted to be accepted but then they wound up becoming isolated by other closures. One store markets within larger regions are not viable. Far remote one store markets are usually different as they are low volume and lack competition but even then some of those have closed. But they have to consider markets where maybe 22 out of 25 stores in a metropolitan area have closed, they are better off closing the remaining 3 stores and exiting entirely to concentrate their efforts elsewhere. I would expect this final closure list to accompany the paperwork to exit the bankruptcy.
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Re: Rite Aid closing at least 63 stores

Post by ClownLoach »

storewanderer wrote: April 17th, 2024, 12:54 am ANOTHER "store of the future" closing - along with 13 additional east coast stores announced 4/16 in bankruptcy docket. 1624 Laskin Road in Virginia Beach.

I find it odd they had so many of these in Virginia Beach. Also how they seem to be closing so many stores there. Wondering if this was a struggling market and they tried these "store of the future" remodels there to try and save it or what.
Based on everything we've seen, it was probably a decent but competitive market but the underwhelming and undermerchandised store of the future killed their sales. I cannot imagine how that useless prototype with assortment comparable to a Circle K outside of pharmacy would not deliver high double digit negative comps if installed in a existing stable store. It reminds me of the conversion of Sav-On to CVS where most of the SKUs and all regional goods were eliminated so the stores lost an average of 40% of their revenues in a year.
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Re: Rite Aid closing at least 63 stores

Post by Retailuser »

Still at 1,690 have they not closed any in the last week?
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Re: Rite Aid closing at least 63 stores

Post by FrankMoore99 »

How is it that stores that still had the RA1 design continued to exist (or still continue to exist) in 2023 and 2024, while newly remodeled locations get or got shut down before them?? What is the story behind them of why they didn't get remodeled?? Were they going to close, but sales continued to remain steady to this point because the competition didn't bring as much of an impact on the store as they predicted (Walgreens was predicted to eat that store, but it didn't, as in the case of Placerville where Walgreens ended up shutting the store three months after the Fair Lane Rite Aid (which still had the 90s RA1 design), making me think that Rite Aid was still holding its own there especially since it received a new sign and stayed open until 2024). Were they going to get remodeled, but the process took much longer than expected. Or do they want to preserve Rite Aid nostalgia?? https://haydenbusinessblog.blogspot.com ... still.html
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Re: Rite Aid closing at least 63 stores

Post by ClownLoach »

FrankMoore99 wrote: April 18th, 2024, 10:13 am How is it that stores that still had the RA1 design continued to exist (or still continue to exist) in 2023 and 2024, while newly remodeled locations get or got shut down before them?? What is the story behind them of why they didn't get remodeled?? Were they going to close, but sales continued to remain steady to this point because the competition didn't bring as much of an impact on the store as they predicted (Walgreens was predicted to eat that store, but it didn't, as in the case of Placerville where Walgreens ended up shutting the store three months after the Fair Lane Rite Aid (which still had the 90s RA1 design), making me think that Rite Aid was still holding its own there especially since it received a new sign and stayed open until 2024). Were they going to get remodeled, but the process took much longer than expected. Or do they want to preserve Rite Aid nostalgia?? https://haydenbusinessblog.blogspot.com ... still.html
It has already been explained elsewhere that chains remodel based on many factors. Store volume, profitability, lease term etc.

Why waste money remodeling a store for example if it only has a few years of lease term left and the relationship with the landlord is bad? Odds are you will spend more money on the remodel than it will deliver if the store has to close because they can't renew the lease. So that store doesn't get remodeled.

A rural store that serves a few thousand customers at best also likely won't be remodeled for decades. Look at Groceteria and you'll see pictures of open, live Safeway and Albertsons stores out in rural areas that are five aisles wide and have 1960s interiors. They operate just fine, have no competitors with nicer stores nearby, and frankly if they had to remodel they'd disrupt business which would upset the customers who depend on them to eat!

There are thousands of legitimate business reasons why one would remodel one store and not another, and very few are going to be publicly determined. No sane company that wants to remain in business will just operate with a first in, first out model for upgrades and remodels. The few that have usually wind up wasting money and sometimes even causing closure of perfectly good stores. Some of the worst business failures have been chains that decided "no matter what" they were going to execute a chain wide remodel to make over their stores into something different and they bankrupted themselves due to unexpected sales impacts from the process. It might surprise you to find that many times remodeled stores have major sales decreases for months during construction and even after the remodel as customers try to figure out where their items moved to. You have to realize that sometimes these smaller businesses like drugstores might only deliver a bottom line annual profit of a few hundred thousand dollars per store, so if the store had to pay for a multi million dollar remodel it would more than likely push the store into a loss each year while it is amoritized against store profits and result in the store actually closing. That remodel would have to prove to deliver more profits and sales than it costs for the store to receive it.

Nobody on a corporate board gives a hoot about nostalgia or any such thing. They only care about money. That is what makes these decisions.

As far as Rite Aid goes, it has been discussed elsewhere that remodeling is one of the factors that bankrupted the company. They had requirements under their financing that they had to spend millions of dollars a year on store remodeling to maintain the "value of the assets." Even if such remodeling was unnecessary. So in some cases they did remodel stores which caused them to lose money, but they were required to spend it anyway. In the last year prior to bankruptcy, Rite Aid spent all that money on sign replacement instead of interior remodels. So the most likely reason for a Rite Aid store not being remodeled would fall on three factors; 1) Landlord or city wouldn't allow it. 2) Not enough term left on the lease to justify remodel. 3) Potential relocation of the store being considered.

So for example I am aware Chino Hills has some signage regulations and it's possible that the one store with 90s signs wouldn't have been allowed to replace with the new logo unless they made it much smaller than the original. You see some older logos on other businesses in that city for the same reasons, newer businesses have smaller signs. Of course nobody publicly would know if they were negotiating with a different landlord or developer to move a store somewhere else, and if they were then they would have cut off funding for upgrades to the old site except necessary repairs.

Most retailers have Real Estate Groups or Asset Review Committees where their Real Estate people, store operations people, regional and district managers, construction people, finance people, and others all meet several times a quarter and review specific stores then make decisions based on budgets about if that store should be considered for remodeling, being left alone, needs a kick in the rear like the manager fired, needs to be moved, needs a major costly repair because something is bad for workers or customers, or the store needs to be closed. They go through the numbers and make the decisions.
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Re: Rite Aid closing at least 63 stores

Post by storewanderer »

Extremely concerned about Rite Aid in stock conditions at the present time.........
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Re: Rite Aid closing at least 63 stores

Post by buckguy »

Rather than make huge cut and pastes, let me follow-up on a couple excellent points form Clown Leach: The real estate based strategy for cutting costs should ultimately cause as many/more problems as it solved. Some businesses have made it work in the past and, at least right now, they may be telling them selves it could work---their predecessor, Gray Drug, was thinly represented in Ohio outside of the NE part of the state. Eckerd seemed satisfied to limp along in peripheral markets like Nashville. But if they're also cutting distribution and trying to make that more efficient, this isn't going to work out for them.

They made some fundamentally bad decisions as they grew and this ultimately constrained their options. Thrifty-Payless was losing money and if the Jean Coutu Eckerds in much of the Southeast were making money, it must have been magic, because they had no customers. At least those stores became Walgreen's problem.

The remodeling thing was perhaps a "good idea" but it became an albatross. Drug stores are pretty utilitarian operations and basic stuff like fresh paint and updated signage are probably more important than major changes to decor. The couple Bartells I saw in Seattle were dreary and truly neglected and would have been an exception---but by that acquisition they didn't have the money. Some remodels get put off because the chain has big plans for a location---a new store or a prototype that doesn't launched, so they delay any investment. The loss of sales during a remodel is probably underappreciated----doing a big remodel for a drug store really requires more thought than one might expect because they are utilitarian places---getting rid of a bad idea like the 45 degree shelving makes sense as does reducing departments that are dying like greeting cards, but only if you know what will perform better. I'm guessing that because RiteAid was limping along for so long they couldn't properly test and tweak any new prototype.
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