Re: Albertsons to buy (what's left of) RiteAid
Posted: February 23rd, 2018, 9:26 am
It will get merged into the Albertsons/Safeway program. They're not going to maintain a separate program.
Crazy about retail.
https://www.retailwatchers.com/
I think operationally Rite Aid is a great fit. Lots of synergies. I have some FTC concerns. I have grave concerns if they try to run Rite Aid like Safeway is run but suspect they won't do that. They can run drugstores that are geographically separate from the grocery operations. It isn't hard to send a truck or two a week to remote geography. Historically, ASC ran lots of Oscos in areas where they had no grocery operations. Albertsons did not really shrink Osco/Sav-On at all; they did relatively few store closures and aside from Boise I am unaware of any markets exited by Osco/Sav-On under the late Albertsons ownership (when did Osco exit New England?).lola42 wrote: ↑February 22nd, 2018, 8:11 pmI believe babs' observation is likely what is happening and what will pan out. The big question is how long the combined companies will actually operate before they are sold, either in part or in whole, to Kroger, Target, Amazon or Walmart.babs wrote: ↑February 22nd, 2018, 8:59 am Sorry to be the negative nelly here but this transaction is all about giving Cerberus an exit strategy. They are using Rite Aid to back door an IPO....While many of your have presented great ways to the two organizations to work together, the reality will be tons of store closures.
The difference between this merger/acquisition and American Stores, Sav-On, etc. is that the traditional supermarket and drug store models no longer exist. The hometown grocer and pharmacy can operate in a select few areas, but when they scale up nationally they have to compete with Amazon and Walmart. Regardless of the pitch, I'm dubious whether Albertsons has the talent or technological know-how to do so. It remains to be seen if Target and/or Kroger do, but their approach to the changing retail landscape appears more well-guided than Albertsons.
The fact that they are keeping the Rite Aid HQ in Camp Hill and even putting the Rite Aid CEO as the new company CEO says that Rite Aid will probably remain as-is. Then again, they briefly put Edwards as CEO at Albertsons in the few months following the merger before he was eased out.storewanderer wrote: ↑February 23rd, 2018, 10:47 pmI think operationally Rite Aid is a great fit. Lots of synergies. I have some FTC concerns. I have grave concerns if they try to run Rite Aid like Safeway is run but suspect they won't do that. They can run drugstores that are geographically separate from the grocery operations. It isn't hard to send a truck or two a week to remote geography. Historically, ASC ran lots of Oscos in areas where they had no grocery operations. Albertsons did not really shrink Osco/Sav-On at all; they did relatively few store closures and aside from Boise I am unaware of any markets exited by Osco/Sav-On under the late Albertsons ownership (when did Osco exit New England?).lola42 wrote: ↑February 22nd, 2018, 8:11 pmI believe babs' observation is likely what is happening and what will pan out. The big question is how long the combined companies will actually operate before they are sold, either in part or in whole, to Kroger, Target, Amazon or Walmart.babs wrote: ↑February 22nd, 2018, 8:59 am Sorry to be the negative nelly here but this transaction is all about giving Cerberus an exit strategy. They are using Rite Aid to back door an IPO....While many of your have presented great ways to the two organizations to work together, the reality will be tons of store closures.
The difference between this merger/acquisition and American Stores, Sav-On, etc. is that the traditional supermarket and drug store models no longer exist. The hometown grocer and pharmacy can operate in a select few areas, but when they scale up nationally they have to compete with Amazon and Walmart. Regardless of the pitch, I'm dubious whether Albertsons has the talent or technological know-how to do so. It remains to be seen if Target and/or Kroger do, but their approach to the changing retail landscape appears more well-guided than Albertsons.
From a Rite Aid Shareholder perspective, this does not look like a good deal at all. We have zero data on how Rite Aid will perform financially once they divest the junk off to Walgreens and lower their debt. Until we have that data, how can we value the company? I don't think we can. I feel like this deal is being rushed and rammed down our throat before we know all of the information that we need to know. That information is: what is this Albertsons Stock actually going to IPO at? We can't even value the offer price without knowing that. And, how would the smaller Rite Aid do financially? Without knowing that, how can we value Rite Aid as a company going forward? My calculations when you take away the junk sold to Walgreens, then add the debt repayments, bring me to expecting a value per share for Rite Aid in the range of about $3.50 at the least. This is still really far from where we were a year ago ($10 Walgreens offer) or nine months ago ($6.50 Walgreens offer). I almost wonder if the whole thing was a ploy all along to devalue the Rite Aid Corporation and let Albertsons have it for very little...
I suspect there is a reason Albertsons is rushing this deal to close by mid 2018 and that is so it will already be done once Rite Aid has sold off the junk stores to Walgreens and paid down debt so we will never see how this smaller Rite Aid will perform financially. Because even if this smaller Rite Aid performs well financially, when you mix it up with Albertsons money losing company and that debt they have... it will not be enough to overshadow the huge losses that Albertsons has.
Once public, Albertsons can issue more shares and do some dilutions to try and raise cash, but that will just devalue the stock further (at least in the short term). If they can get the right mix of dilutions and debt pay downs so the operation starts being profitable, though, it could work out. I am not really in a position to predict the success of failure of that sort of tactic.
But putting that shareholder opinion aside from the perspective of someone who likes stores, I do think this could be good for Rite Aid and also good for the rest of the Albertsons operation to enhance their mix and get out of the Safeway rut they have gotten somewhat into. I definitely prefer this to the Walgreens full merger and believe it will result in Rite Aid continuing as a store chain in the future in most of these regions they are currently in.
I would be even happier if Kroger was the proposed buyer... I feel like there is a lot less overlap between Kroger and Rite Aid, than Albertsons and Rite Aid. I also think Kroger could operate drug stores very well, absolutely as well as Albertsons could.
Drug store shopping rewards programs are different that supermarkets. If Rite Aid is going to compete with Walgreens and CVS, they have to keep or create something like their Wellness+Bonus Cash rewards program.
Which states were those even in? NH seems to be the most likely (and the one I remember seeing them in), since 62 RA stores remain there (out of 68 originally) post sales to Walgreens. VT is only keeping 6 (out of 37), MA only 10 (out of 144) and ME has no RA stores left. CT has 34 (out of 77) and RI also has none, if those were even in the Osco region originally?
Not to mention that they went to the trouble to recreate the Bonus Cash program (which is more or less the same as the +UP Rewards they used prior to going into the Plenti program, with a couple minor changes like longer times to use the rewards and no option to print them out).CalItalian wrote: ↑February 24th, 2018, 9:02 am Drug store shopping rewards programs are different that supermarkets. If Rite Aid is going to compete with Walgreens and CVS, they have to keep or create something like their Wellness+Bonus Cash rewards program.
Maine, New Hampshire, and Massachusetts were the sold stores.BillyGr wrote: ↑February 24th, 2018, 10:22 amWhich states were those even in? NH seems to be the most likely (and the one I remember seeing them in), since 62 RA stores remain there (out of 68 originally) post sales to Walgreens. VT is only keeping 6 (out of 37), MA only 10 (out of 144) and ME has no RA stores left. CT has 34 (out of 77) and RI also has none, if those were even in the Osco region originally?
Safeway was going nowhere and a lot of that "free cash flow" was the rapid sale of divisions. It's this guy forgot that Safeway had sold off or closed all but one Genuardi's, closed the entire Chicago division (and with it, Dominick's), sold the Canadian division, and was on the verge of closing the Texas Division. To compare Safeway to Kroger is laughable, and that paragraph single-handedly undermines the entire article.Followers of the grocery store sector will most likely remember Safeway as a high-quality company with loyal customers, a fantastic loyalty program called Just 4 U, steadily growing comparable sales, robust free cash flow and a ton of real estate. Safeway was a truly great company that, like Kroger, was never really awarded a fair valuation given the free cash flow it produced. Looking at a slide from Safeway’s investor day presentation before it was acquired by Cerberus, we can see the company consistently produced a ton of cash.
On that note, Rite Aid, which did poorly for a while, seemed to be on a roll to remodel many of their acquired stores that were last remodeled in the PayLess or Pay 'N Save days. And they were actually pretty thorough remodels. A few years ago Walgreens seemed to have nicer stores, but now I am seeing the older Rite Aid stores being updated while they are letting things slide at the newer Walgreens locations. Is the partnership with Albertsons going to change this?storewanderer wrote: ↑March 19th, 2018, 10:40 pm Albertsons actually seemed to be getting its financials in order before they bought Safeway. Throwing Safeway into the mix, which was deteriorating very rapidly in financial performance and operationally, completely screwed everything up.
Add on all that debt and it only made things worse... much worse... and here we are today.
We will see how they do with Rite Aid. How much will they have to divest? It will be hard for them to get much money for any stores being divested, given how little they are paying for Rite Aid as a whole...
The finances of Albertsons got worse and worse last year. This year, the grocery business is not seeing the inflation they were hoping to see and it seems to be a difficult year in general. Maybe Albertsons will buck that trend, that remains to be seen. I do think they are running better stores and being more competitive with Kroger in some markets than they used to be, but I am not sure what they are doing is exactly profitable. i continue to see marginal store conditions and VERY high pricing in NorCal. Prices decrease then shoot back up again in short order. It is quite a joke. Pricing department is out of control.