WSJ: Rite Aid plans 400-500 store closures in pending bankruptcy filing

[storewanderer]

I find it interesting that the discussion here calls for first the closure of another 500-ish stores, then the creditors taking over.

That might indicate there is an agreement being worked out for the creditors and possibly a PE firm to run as a going concern. Which means they won't just hold the standard auction and Gordon Brothers, Hilco or whoever else bids to liquidate. Unfortunately there could also be a deal being made for CVS and Walgreens to split up the stores as going concerns, with the unwanted locations being the 500 closures. Because it's a bankruptcy antitrust considerations would be irrelevant and FTC approval not needed.

We all know that there is a market especially for a proper "West Coast Drugstore" which as of recent years had diminished to only Bartell before RA stupidly bought it and then mismanaged the merger. I'm sure they lost half or more of the customer base at Bartell with the system issues and other aggravation they caused. Walmart, Costco and CVS probably have split those lost customers who may never return.

Maybe Bartell gets sold back to local ownership who gives a damn about the concept and restores it? Might be too late.

Based on how little Rite Aid paid for Bartell (about $65 million), I don't think it was making much money, if any money. Now it is smaller, and will be shedding some leases in a bankruptcy process, so maybe that would make for a more profitable Bartell for someone else to buy?

Now take it a step further and could you carve out another group or groups of former Rite Aid Stores in some region (MI, PA, CA, whatever) and re-launch it profitably after shedding the bad leases, debt restructure, etc.?

[storewanderer]

I wonder how long the pharmacy reimbursement issue has been going on specifically with Rite Aid and their handling of prescriptions.

I recall five years ago or thereabouts I had a prescription that I got from an urgent care center for an inhaler to help treat a bad case of bronchitis. There was a Rite Aid in the same center as the urgent care so I had them send over the prescription. About an hour goes by and Rite Aid calls and says the prescription is ready for pickup. It was charged at my normal copay which at the time was about $15.

The next day I get a voicemail from the urgent care. "Hi, we are so sorry but we realized that we prescribed that inhaler and that one is not covered by your insurance. It's going to be hundreds of dollars for you to get it filled. If you come by we will discuss other options and get you a new prescription for an inhaler your insurance will cover."

I checked the insurance website and sure enough it was not covered at all.

Rite Aid had already dispensed it, collected usual and customary copay, and never contacted me about it after. They must have lost a fortune with how crazy drug prices are these days. I'm guessing they have no recourse once they've dispensed and charged for it if the error is on their behalf.

I know that does not happen at CVS, their systems double and triple check everything to make sure they get paid... Even if Caremark is the insurance. Sounds like there are still issues with certain drugs, but Rite Aid must have been running some kind of antiquated system that didn't or couldn't check to see if insurance would pay my prescription? Yet the doctors office systems could see it easily...

In order for Rite Aid to know you had a $15 co-pay, they have to have run the thing through the authorization network. So it is possible the authorization network made an error on even authorizing that (in which case Rite Aid would still get paid). Like, the store doesn't manually input the co-pay (the way a doctor's office does) and arbitrarily collect it. The authorization network kicks back the co-pay when they process the insurance transaction.

The reimbursement issue I keep referring to is the flat out situation where the store gets reimbursed $90 by insurance to fill a prescription with a cost of $250 from the drug wholesaler.

[marshd1000]

In fact,if it came to that,a split into separate east and west companies would be a lot more sensible(especially if the western entity is debt-free).If WBA was to persue a second crack at RAD stores the east stores would be of a lowered antitrust risk than the attempted outright merger which failed to receive the blessing of the FTC.The west(it would also include the Thrifty ice cream business and associated trademarks as well as Bartell Drugs;stores would most logically be branded as Bartell in Washington,Idaho,and northern Oregon including Portland while California and Nevada locations as well as those in southern Oregon would take the Thrifty name)could be attractive to overseas entities(Shoppers Drug Mart/Loblaws,Watsons,Sanborns to name a few)looking to gain a foothold in the states.Private equity(Leonard Green,etc.)if at all would depend on the group.The west coast operations can be saved if spun off to the right buyer(s)...and it can be done.

I mostly agree that if the Western states had their Rite Aid stores spun off, going with a different name from the past might be good! However, I’m not sure about using the Bartell name in Idaho and Southern Oregon or even outside Puget Sound? The Bartell stores are different enough that I think they could keep their name. So if the existing Puget Sound Rite Aid stores were re-merchandised with a Bartell product mix that would work! But if the Puget Sound Rite Aid stores were not converted to Bartell, why not bring the PayLess Drug name back? Plus, PayLess was headquartered in Wilsonville, OR and was fairly strong in WA, OR and ID. Thrifty, did have some stores in the PNW at one time, but not that many. PayLess, as we know, did have stores in CA and elsewhere but outside the PNW, it would make sense to go with Thrifty! I earlier had mentioned Loblaws coming back into the US perhaps with Shoppers Drug Mart branded stores! Those stores are kind of like a Bartell’s on steroids! So why not buy West Coast Rite Aid and buy the Thrifty, PayLess & Bartell banners at the same time? Hey, my dream is that they would get crazy and establish a PayLess Food & Drug superstore! Then we can have President’s Choice back!

[Super S]

In fact,if it came to that,a split into separate east and west companies would be a lot more sensible(especially if the western entity is debt-free).If WBA was to persue a second crack at RAD stores the east stores would be of a lowered antitrust risk than the attempted outright merger which failed to receive the blessing of the FTC.The west(it would also include the Thrifty ice cream business and associated trademarks as well as Bartell Drugs;stores would most logically be branded as Bartell in Washington,Idaho,and northern Oregon including Portland while California and Nevada locations as well as those in southern Oregon would take the Thrifty name)could be attractive to overseas entities(Shoppers Drug Mart/Loblaws,Watsons,Sanborns to name a few)looking to gain a foothold in the states.Private equity(Leonard Green,etc.)if at all would depend on the group.The west coast operations can be saved if spun off to the right buyer(s)...and it can be done.

I mostly agree that if the Western states had their Rite Aid stores spun off, going with a different name from the past might be good! However, I’m not sure about using the Bartell name in Idaho and Southern Oregon or even outside Puget Sound? The Bartell stores are different enough that I think they could keep their name. So if the existing Puget Sound Rite Aid stores were re-merchandised with a Bartell product mix that would work! But if the Puget Sound Rite Aid stores were not converted to Bartell, why not bring the PayLess Drug name back? Plus, PayLess was headquartered in Wilsonville, OR and was fairly strong in WA, OR and ID. Thrifty, did have some stores in the PNW at one time, but not that many. PayLess, as we know, did have stores in CA and elsewhere but outside the PNW, it would make sense to go with Thrifty! I earlier had mentioned Loblaws coming back into the US perhaps with Shoppers Drug Mart branded stores! Those stores are kind of like a Bartell’s on steroids! So why not buy West Coast Rite Aid and buy the Thrifty, PayLess & Bartell banners at the same time? Hey, my dream is that they would get crazy and establish a PayLess Food & Drug superstore! Then we can have President’s Choice back!

Only problem is that today's Rite Aid is a very different, downsized store than the old PayLess and Thrifty stores, and even Pay 'N Save were (which was acquired by Thrifty/PayLess). There are still enough people who remember the old formats and would expect some of that to come back with an old name. Some examples of past merchandise include full sporting goods departments, full electronics departments, music records/tapes/CDs, more extensive automotive & hardware, crafts, garden centers, and even full apparel departments at some locations.

Walmart was just starting to expand across the Pacific Northwest in the mid 1990s, and the old stores served a purpose as a general merchandise store in many areas which lacked other options. These days, you not only have Walmart, but also Target, and more recently Dollar General. I can't see the old formats returning any time soon regardless of who owns Rite Aid.

[wnetmacman]

The question at this point is how many stores can actually be sold to CVS/Walgreens as ongoing stores.

And how many locations simply close with the prescription files transferred to a nearby CVS/Walgreens?

I am shaken by this quote which I read last night:
"The company has proposed to close roughly 400 to 500 stores in bankruptcy, and either sell or let creditors take over its remaining operations, according to the report."

So basically it is like they are just giving up. Throwing in the towel IF the above is true...

Did the last CEO really kill the company to the point that it has come to this? At least they got all those great new logo signs up. At least someone's buddy at a marketing agency and sign shops made money.

Also it appears Elixr (sp) has been completely mismanaged the past few years. What was previously a growing enterprise just quit growing under the last CEO. Now is the time where I start to put the blame on what has happened here on the last CEO. I've been careful not to place blame in the past, but it is now clear if the company is in such shambles that they just want to walk away and give it to creditors that the damage done by this last CEO was far beyond what meets the eye of an outside observer.

As far as the east vs. west thing goes the amount of closures in SoCal is somewhat surprising to me. It is interesting how busy stores can be losing money with how screwed up the pharmacy reimbursement situation has gotten. Also based on the specific stores they've chosen to close in OR, plus the distribution center, we will see what happens in OR. WA they are obviously having too many stores since buying Bartell, over 200 stores in that state.

I think RiteAid's issues go back further than the last CEO.

During the 90's, they went on a massive acquisition spree, taking over some fairly storied names in the pharmacy business - Thrifty, Payless, Big B, K&B and others, followed by a purchase of the Jean Coutu/Eckerd assets in the 2010s. All of these were purchases that little Rite Aid had very little business taking over. All of those names were eradicated once Rite Aid assimilated them into the fold. Customers remember this. The Thrifty purchase initially eliminated the storied Thrifty Ice Cream initially. When it did come back, it was too little, too late to recover.

I do agree their best hope is to sell and hope for the best.

[babs]

The question at this point is how many stores can actually be sold to CVS/Walgreens as ongoing stores.

And how many locations simply close with the prescription files transferred to a nearby CVS/Walgreens?

I am shaken by this quote which I read last night:
"The company has proposed to close roughly 400 to 500 stores in bankruptcy, and either sell or let creditors take over its remaining operations, according to the report."

So basically it is like they are just giving up. Throwing in the towel IF the above is true...

Did the last CEO really kill the company to the point that it has come to this? At least they got all those great new logo signs up. At least someone's buddy at a marketing agency and sign shops made money.

Also it appears Elixr (sp) has been completely mismanaged the past few years. What was previously a growing enterprise just quit growing under the last CEO. Now is the time where I start to put the blame on what has happened here on the last CEO. I've been careful not to place blame in the past, but it is now clear if the company is in such shambles that they just want to walk away and give it to creditors that the damage done by this last CEO was far beyond what meets the eye of an outside observer.

As far as the east vs. west thing goes the amount of closures in SoCal is somewhat surprising to me. It is interesting how busy stores can be losing money with how screwed up the pharmacy reimbursement situation has gotten. Also based on the specific stores they've chosen to close in OR, plus the distribution center, we will see what happens in OR. WA they are obviously having too many stores since buying Bartell, over 200 stores in that state.

I think RiteAid's issues go back further than the last CEO.

During the 90's, they went on a massive acquisition spree, taking over some fairly storied names in the pharmacy business - Thrifty, Payless, Big B, K&B and others, followed by a purchase of the Jean Coutu/Eckerd assets in the 2010s. All of these were purchases that little Rite Aid had very little business taking over. All of those names were eradicated once Rite Aid assimilated them into the fold. Customers remember this. The Thrifty purchase initially eliminated the storied Thrifty Ice Cream initially. When it did come back, it was too little, too late to recover.

I do agree their best hope is to sell and hope for the best.

100% this! Rite Aid never really recovered from Martin Grass cooking the books after all the acquisitions caused sales to tank. Rite Aid lost customers in many of their markets after failing to understand what they purchases. The company has been on life support for over 25 years.

As I see it, there are only two likely purchasers. CVS might want to fill out their gap in Oregon and Washington with Rite Aid stores a long as it's at a decent price. Private equity might be interested if they can figure out to ring more cash out of this turd. But beyond that, there is little value left in this chain beyond the pharmacy files. No one will miss Rite Aid.

And yes, someone will pickup Thrifty Ice Cream. It's cache is likely to attract interest as a standalone brand by another dairy.

[marshd1000]

In fact,if it came to that,a split into separate east and west companies would be a lot more sensible(especially if the western entity is debt-free).If WBA was to persue a second crack at RAD stores the east stores would be of a lowered antitrust risk than the attempted outright merger which failed to receive the blessing of the FTC.The west(it would also include the Thrifty ice cream business and associated trademarks as well as Bartell Drugs;stores would most logically be branded as Bartell in Washington,Idaho,and northern Oregon including Portland while California and Nevada locations as well as those in southern Oregon would take the Thrifty name)could be attractive to overseas entities(Shoppers Drug Mart/Loblaws,Watsons,Sanborns to name a few)looking to gain a foothold in the states.Private equity(Leonard Green,etc.)if at all would depend on the group.The west coast operations can be saved if spun off to the right buyer(s)...and it can be done.

I mostly agree that if the Western states had their Rite Aid stores spun off, going with a different name from the past might be good! However, I’m not sure about using the Bartell name in Idaho and Southern Oregon or even outside Puget Sound? The Bartell stores are different enough that I think they could keep their name. So if the existing Puget Sound Rite Aid stores were re-merchandised with a Bartell product mix that would work! But if the Puget Sound Rite Aid stores were not converted to Bartell, why not bring the PayLess Drug name back? Plus, PayLess was headquartered in Wilsonville, OR and was fairly strong in WA, OR and ID. Thrifty, did have some stores in the PNW at one time, but not that many. PayLess, as we know, did have stores in CA and elsewhere but outside the PNW, it would make sense to go with Thrifty! I earlier had mentioned Loblaws coming back into the US perhaps with Shoppers Drug Mart branded stores! Those stores are kind of like a Bartell’s on steroids! So why not buy West Coast Rite Aid and buy the Thrifty, PayLess & Bartell banners at the same time? Hey, my dream is that they would get crazy and establish a PayLess Food & Drug superstore! Then we can have President’s Choice back!

Only problem is that today's Rite Aid is a very different, downsized store than the old PayLess and Thrifty stores, and even Pay 'N Save were (which was acquired by Thrifty/PayLess). There are still enough people who remember the old formats and would expect some of that to come back with an old name. Some examples of past merchandise include full sporting goods departments, full electronics departments, music records/tapes/CDs, more extensive automotive & hardware, crafts, garden centers, and even full apparel departments at some locations.

Walmart was just starting to expand across the Pacific Northwest in the mid 1990s, and the old stores served a purpose as a general merchandise store in many areas which lacked other options. These days, you not only have Walmart, but also Target, and more recently Dollar General. I can't see the old formats returning any time soon regardless of who owns Rite Aid.

What you stated is true about the old PayLess, Pay ‘n Save and Thrifty is true! The current Rite Aid is not like those acquired stores! PayLess Drug back in the 1970’s, at least in the Seattle area was very heavy on general merchandise! I remember the old Burien, Renton and Aurora Ave locations also having full apparel departments and being very similar to some of the non food Fred Meyer stores that had been in the area during that time frame! Those particular stores were former Gov-Mart Bazaar stores! Having said all that, I still think that the PayLess name still would have value on these smaller stores! By the 1990’s PayLess had gotten a lot smaller! I also remember that they dramatically reduced their footprint at their Burien location and was basically a Rite Aid sized store. Also when they had acquired Pay ‘n Save, that purchase came with locations that Pay ‘n Save had acquired from G.O. Guy Drugs, which were physically smaller!

[pseudo3d]

I mostly agree that if the Western states had their Rite Aid stores spun off, going with a different name from the past might be good! However, I’m not sure about using the Bartell name in Idaho and Southern Oregon or even outside Puget Sound? The Bartell stores are different enough that I think they could keep their name. So if the existing Puget Sound Rite Aid stores were re-merchandised with a Bartell product mix that would work! But if the Puget Sound Rite Aid stores were not converted to Bartell, why not bring the PayLess Drug name back? Plus, PayLess was headquartered in Wilsonville, OR and was fairly strong in WA, OR and ID. Thrifty, did have some stores in the PNW at one time, but not that many. PayLess, as we know, did have stores in CA and elsewhere but outside the PNW, it would make sense to go with Thrifty! I earlier had mentioned Loblaws coming back into the US perhaps with Shoppers Drug Mart branded stores! Those stores are kind of like a Bartell’s on steroids! So why not buy West Coast Rite Aid and buy the Thrifty, PayLess & Bartell banners at the same time? Hey, my dream is that they would get crazy and establish a PayLess Food & Drug superstore! Then we can have President’s Choice back!

Only problem is that today's Rite Aid is a very different, downsized store than the old PayLess and Thrifty stores, and even Pay 'N Save were (which was acquired by Thrifty/PayLess). There are still enough people who remember the old formats and would expect some of that to come back with an old name. Some examples of past merchandise include full sporting goods departments, full electronics departments, music records/tapes/CDs, more extensive automotive & hardware, crafts, garden centers, and even full apparel departments at some locations.

Walmart was just starting to expand across the Pacific Northwest in the mid 1990s, and the old stores served a purpose as a general merchandise store in many areas which lacked other options. These days, you not only have Walmart, but also Target, and more recently Dollar General. I can't see the old formats returning any time soon regardless of who owns Rite Aid.

What you stated is true about the old PayLess, Pay ‘n Save and Thrifty is true! The current Rite Aid is not like those acquired stores! PayLess Drug back in the 1970’s, at least in the Seattle area was very heavy on general merchandise! I remember the old Burien, Renton and Aurora Ave locations also having full apparel departments and being very similar to some of the non food Fred Meyer stores that had been in the area during that time frame! Those particular stores were former Gov-Mart Bazaar stores! Having said all that, I still think that the PayLess name still would have value on these smaller stores! By the 1990’s PayLess had gotten a lot smaller! I also remember that they dramatically reduced their footprint at their Burien location and was basically a Rite Aid sized store. Also when they had acquired Pay ‘n Save, that purchase came with locations that Pay ‘n Save had acquired from G.O. Guy Drugs, which were physically smaller!

Yeah, the K&B Drug store chain was also very different from the Rite Aid purchase before and after (for the worse). It gave Rite Aid a presence in Louisiana it might not otherwise have had but Eckerd rolled them over, even back then. Unsurprisingly, these stores all got sold to Walgreens in the fallout of the failed merger.

[wnetmacman]

Yeah, the K&B Drug store chain was also very different from the Rite Aid purchase before and after (for the worse). It gave Rite Aid a presence in Louisiana it might not otherwise have had but Eckerd rolled them over, even back then. Unsurprisingly, these stores all got sold to Walgreens in the fallout of the failed merger.

At the same time that Rite Aid bought the K&B stores, Walgreens made their famous push back into Louisiana. Eckerd was already beginning to flail under the JCPenney ownership, and while they were part of Rite Aid's eventual failure, it was a small part

Rite Aid had already pulled all the stores out of Texas and most of the rest of the area when they sold what little was left (and hand picked) to Walgreens. As an example:

There were five stores in Shreveport, which all had converted to Rite Aid/Save-A-Lot combos. One made it to the sale, on Line Ave. at Pierremont Rd. The rest all closed prior to the sale.
Monroe/West Monroe - three stores, none survive.
Alexandria - three stores, none survive
Lafayette - one out of six made it to the merger. One survived to be converted, but did not last.
Morgan City/Bayou Vista - two stores. One survived to be converted, but did not last.
New Iberia - two stores. One closed prior to the sale. The other still runs, but is on limited hours.
Lake Charles - no survivors.

So two stores out of more than 30 west of the Mississippi River survive. I would say that Rite Aid didn't understand any client base they acquired, but K&B took a particularly hard hit.

[BillyGr]

One other smaller chain that could factor in (if they wanted to) in the northern parts of NY/New England would be Kinney Drugs.

They've been around 120 years and have about 100 stores in NY and the northern half of VT (including one they just reopened in Montpelier VT after flooding earlier this summer that is an old, main street type store, so they seem to be somewhat flexible on types of stores as well).

Out of the 5 remaining Rite Aid stores in VT, 4 are in towns that Kinney is not. There is also that cluster of 54 in NH, some of which could easily connect (since the VT stores go as far east as to just about the CT River border).

Might also be some of the stores in Northern NY that would work (they have one now in Queensbury, so continuing down I-87 to Saratoga, Clifton Park etc. might be feasible, and there are a few others further west that might be closer to their existing areas as well).

They did take at least one Eckerd (Lake Placid) when Rite Aid bought them (otherwise there would have been no competition as those were the only two chains there) - may have gotten others as well, that is the only one I was familiar with. Not that that means they would, but just a chain to add that others may not even know of if not in this part of the country.

Noting also that those few remaining Rite Aid stores along that I-87 corridor were mostly areas where Walgreens had already opened (in some cases virtually across the street), so they are unlikely to be feasible there - CVS might work here or there, but not most either.