Rite Aid Bankruptcy Speculation

[ClownLoach]

The interest rate thing, the opioid thing, these are issues out of management's control also that seem to be causing major problems.

The hallmark of bad management is the inability to prepare for the unknown. Good leaders have a contingency plan. These issues haven't upended Walgreens or CVS. And that's the worst part; bad management never seems to make it to the death certificate for these companies. It's always something like the need for opioid settlement, or interest rate problems. They'll be to blame this time too, instead of the cancer of years of indifference from mediocre, clueless management.

[ClownLoach]

The interest rate thing, the opioid thing, these are issues out of management's control also that seem to be causing major problems.

The hallmark of bad management is the inability to prepare for the unknown. Good leaders have a contingency plan. These issues haven't upended Walgreens or CVS. And that's the worst part; bad management never seems to make it to the death certificate for these companies. It's always something like the need for opioid settlement, or interest rate problems. They'll be to blame this time too, instead of the cancer of years of indifference from mediocre, clueless management.

Hopefully they can break whatever weird loan covenants required so much wasted money on unnecessary remodeling with the bankruptcy. Supposedly they were supposed to invest significant funds to remodel stores to "maintain the value of the assets". (In another thread I posed some questions about this type of activity because I'm not entirely sure how the remodel can be accounted for to increase the asset value of a leased facility). The money wasted on the new signs for example. I can't help but wonder if the middle and lower management (buyers and merchandisers) pushed for the signs versus more remodels to the worthless new format because they knew the CEO was full of crap and her new, unnecessary format was going to be a failure. There was nothing wrong with the most recent Wellness format stores, in fact the "top tier" ones with the recessed lighting and fancy tile floors might have been the best looking chain drugstore in America. They just needed some different merchandise (not less of it) and pricing help but they shouldn't have been doing any newer prototype when they hadn't even remodeled the entire chain to Wellness yet.

I won't be the least bit surprised if that brand new Winchester CA store is put on the new closure list despite the up and coming area which will get 30,000+ homes over the next decade plus. It is worthless in it's current form, way too small. They can probably increase the SKU count by 25% by fixing the dumb 4 ft tall aisle leads and making them regular height plus adding aisles in all the open space, but they also wasted a ton of space making a dumb dine in Cafe space for the Thrifty Ice Cream counter. I think at least 30% of the space is the open front landing area and the giant checkout counter plus Cafe space. So all that very fancy front end needs to be demolished to put the checkout counter back against the front wall and regain most of it as floor space for additional aisles to add SKUs plus room for more refrigeration and a real liquor dept. For a brand new store it might not be worth the time and expense to do this much remodeling when they can just empty it out and hand the keys back to the landlord cost free. They've probably sunk too much money into it already and there's a rumor that the long delayed mega big box center across the street has an anchor now... They are finally building phase one with just some basics, a Sprouts, PetSmart, Ulta and another couple boxes, but the anchor might be the first incremental new build Walmart Supercenter in California in years. That will be the last nail in the coffin for Winchester even if they spend a million or so fixing all the mistakes of the horrible new prototype. Not worth it in my opinion, and the community has already written this store off.

[storewanderer]

The hallmark of bad management is the inability to prepare for the unknown. Good leaders have a contingency plan. These issues haven't upended Walgreens or CVS. And that's the worst part; bad management never seems to make it to the death certificate for these companies. It's always something like the need for opioid settlement, or interest rate problems. They'll be to blame this time too, instead of the cancer of years of indifference from mediocre, clueless management.

Hopefully they can break whatever weird loan covenants required so much wasted money on unnecessary remodeling with the bankruptcy. Supposedly they were supposed to invest significant funds to remodel stores to "maintain the value of the assets". (In another thread I posed some questions about this type of activity because I'm not entirely sure how the remodel can be accounted for to increase the asset value of a leased facility). The money wasted on the new signs for example. I can't help but wonder if the middle and lower management (buyers and merchandisers) pushed for the signs versus more remodels to the worthless new format because they knew the CEO was full of crap and her new, unnecessary format was going to be a failure. There was nothing wrong with the most recent Wellness format stores, in fact the "top tier" ones with the recessed lighting and fancy tile floors might have been the best looking chain drugstore in America. They just needed some different merchandise (not less of it) and pricing help but they shouldn't have been doing any newer prototype when they hadn't even remodeled the entire chain to Wellness yet.

I won't be the least bit surprised if that brand new Winchester CA store is put on the new closure list despite the up and coming area which will get 30,000+ homes over the next decade plus. It is worthless in it's current form, way too small. They can probably increase the SKU count by 25% by fixing the dumb 4 ft tall aisle leads and making them regular height plus adding aisles in all the open space, but they also wasted a ton of space making a dumb dine in Cafe space for the Thrifty Ice Cream counter. I think at least 30% of the space is the open front landing area and the giant checkout counter plus Cafe space. So all that very fancy front end needs to be demolished to put the checkout counter back against the front wall and regain most of it as floor space for additional aisles to add SKUs plus room for more refrigeration and a real liquor dept. For a brand new store it might not be worth the time and expense to do this much remodeling when they can just empty it out and hand the keys back to the landlord cost free. They've probably sunk too much money into it already and there's a rumor that the long delayed mega big box center across the street has an anchor now... They are finally building phase one with just some basics, a Sprouts, PetSmart, Ulta and another couple boxes, but the anchor might be the first incremental new build Walmart Supercenter in California in years. That will be the last nail in the coffin for Winchester even if they spend a million or so fixing all the mistakes of the horrible new prototype. Not worth it in my opinion, and the community has already written this store off.

Rite Aid has a very small store in Kings Beach, CA that has a pretty full SKU assortment. The primary things missing are:
1. "Large" paper products and "large" laundry detergents
2. Typical Rite Aid Seasonal (they get a ton of vendor seasonal like plastic sleds, beach stuff, toys, towels, clothing and display it outside/in the entryway/etc.)
This store is under 5k square feet but it packs a ton of items. You can see photos on Google Maps.

This started as a Thrifty Jr. and as Thrifty Jr. it felt lacking in core drugstore items; the aisles were a little wider, checkout was an island in the middle, it had a photo counter along the front wall. This store got 2 remodels by Rite Aid: the first remodel basically gave the store its current layout and a deep remerchandising effort to merchandise every square inch of the place to get better SKU assortment. The second remodel was a Wellness remodel that redecorated/put down a new floor but didn't change the layout or merchandising much.

The reason I bring that up is I think it would be easier for them to fix this new store than you are thinking. Increasing shelf height, making some aisles longer, enlarging endcaps, putting sidecaps back in, all would go a long ways to add SKUs without having to tear out aisles. I think they could make the space work. I've seen a lot of well merchandised 10k square foot range Rite Aids. But it usually involves higher than average shelves and more narrow than average aisles.

[Romr123]

Sounds like there's a similar store in Berkley, MI---downtown suburban store in a portion of a converted movie theater (marquee and all) that has a big airlock vestibule (in essentially the former ticket lobby) and a pretty narrow, deep space. They merchandise seasonal in the vestibule (they do huge business in pool noodles) and the rest of the store has tall shelves and relatively narrow aisles, but it fits the neighborhood and has a good customer base.

[ClownLoach]

The hallmark of bad management is the inability to prepare for the unknown. Good leaders have a contingency plan. These issues haven't upended Walgreens or CVS. And that's the worst part; bad management never seems to make it to the death certificate for these companies. It's always something like the need for opioid settlement, or interest rate problems. They'll be to blame this time too, instead of the cancer of years of indifference from mediocre, clueless management.

Hopefully they can break whatever weird loan covenants required so much wasted money on unnecessary remodeling with the bankruptcy. Supposedly they were supposed to invest significant funds to remodel stores to "maintain the value of the assets". (In another thread I posed some questions about this type of activity because I'm not entirely sure how the remodel can be accounted for to increase the asset value of a leased facility). The money wasted on the new signs for example. I can't help but wonder if the middle and lower management (buyers and merchandisers) pushed for the signs versus more remodels to the worthless new format because they knew the CEO was full of crap and her new, unnecessary format was going to be a failure. There was nothing wrong with the most recent Wellness format stores, in fact the "top tier" ones with the recessed lighting and fancy tile floors might have been the best looking chain drugstore in America. They just needed some different merchandise (not less of it) and pricing help but they shouldn't have been doing any newer prototype when they hadn't even remodeled the entire chain to Wellness yet.

I won't be the least bit surprised if that brand new Winchester CA store is put on the new closure list despite the up and coming area which will get 30,000+ homes over the next decade plus. It is worthless in it's current form, way too small. They can probably increase the SKU count by 25% by fixing the dumb 4 ft tall aisle leads and making them regular height plus adding aisles in all the open space, but they also wasted a ton of space making a dumb dine in Cafe space for the Thrifty Ice Cream counter. I think at least 30% of the space is the open front landing area and the giant checkout counter plus Cafe space. So all that very fancy front end needs to be demolished to put the checkout counter back against the front wall and regain most of it as floor space for additional aisles to add SKUs plus room for more refrigeration and a real liquor dept. For a brand new store it might not be worth the time and expense to do this much remodeling when they can just empty it out and hand the keys back to the landlord cost free. They've probably sunk too much money into it already and there's a rumor that the long delayed mega big box center across the street has an anchor now... They are finally building phase one with just some basics, a Sprouts, PetSmart, Ulta and another couple boxes, but the anchor might be the first incremental new build Walmart Supercenter in California in years. That will be the last nail in the coffin for Winchester even if they spend a million or so fixing all the mistakes of the horrible new prototype. Not worth it in my opinion, and the community has already written this store off.

Rite Aid has a very small store in Kings Beach, CA that has a pretty full SKU assortment. The primary things missing are:
1. "Large" paper products and "large" laundry detergents
2. Typical Rite Aid Seasonal (they get a ton of vendor seasonal like plastic sleds, beach stuff, toys, towels, clothing and display it outside/in the entryway/etc.)
This store is under 5k square feet but it packs a ton of items. You can see photos on Google Maps.

This started as a Thrifty Jr. and as Thrifty Jr. it felt lacking in core drugstore items; the aisles were a little wider, checkout was an island in the middle, it had a photo counter along the front wall. This store got 2 remodels by Rite Aid: the first remodel basically gave the store its current layout and a deep remerchandising effort to merchandise every square inch of the place to get better SKU assortment. The second remodel was a Wellness remodel that redecorated/put down a new floor but didn't change the layout or merchandising much.

The reason I bring that up is I think it would be easier for them to fix this new store than you are thinking. Increasing shelf height, making some aisles longer, enlarging endcaps, putting sidecaps back in, all would go a long ways to add SKUs without having to tear out aisles. I think they could make the space work. I've seen a lot of well merchandised 10k square foot range Rite Aids. But it usually involves higher than average shelves and more narrow than average aisles.

We used to have a Thrifty Jr in Long Beach Belmont Shore, and I guarantee you that it had 50% more SKUs than that useless new prototype.

The big issue they've got to address is that on a 12,000 Sq ft sales floor they waste at least 4,000 Sq ft with the giant empty landing pad and super sized combination checkout, customer service, ice cream and self checkout island plus Cafe space. You can more or less walk around the entire thing if they hadn't put a gondola at the far end to "corral" liquor. It's more work than it should be. Plus it looks very cheap except for the hanging ceiling grid with fake plants and stuff but you know how those worked out in the 80s... The quality of materials shown in the investor materials for the prototype clearly was slashed to cheap looking extruded foam letters and such for signage, cheap flooring and lighting. Major downgrade from new build Wellness stores and their bamboo look flooring, recessed LED can lights and so forth.

At an absolute minimum it needs full height gondolas, endcaps and such. They also need to figure out how to expand refrigeration because it has very little, not even more than a dozen SKUs of the famous Thrifty Ice Cream.

[storewanderer]

We used to have a Thrifty Jr in Long Beach Belmont Shore, and I guarantee you that it had 50% more SKUs than that useless new prototype.

The big issue they've got to address is that on a 12,000 Sq ft sales floor they waste at least 4,000 Sq ft with the giant empty landing pad and super sized combination checkout, customer service, ice cream and self checkout island plus Cafe space. You can more or less walk around the entire thing if they hadn't put a gondola at the far end to "corral" liquor. It's more work than it should be. Plus it looks very cheap except for the hanging ceiling grid with fake plants and stuff but you know how those worked out in the 80s... The quality of materials shown in the investor materials for the prototype clearly was slashed to cheap looking extruded foam letters and such for signage, cheap flooring and lighting. Major downgrade from new build Wellness stores and their bamboo look flooring, recessed LED can lights and so forth.

At an absolute minimum it needs full height gondolas, endcaps and such. They also need to figure out how to expand refrigeration because it has very little, not even more than a dozen SKUs of the famous Thrifty Ice Cream.

What is the point of the giant checkout area? Is there something going on there that we are missing/something intended to be going on that isn't getting any customer use so it appears as if it is all wasted space? Photo? Storage for Amazon pickups? Mailing services? Is the safe/office area there? They hardly have any volume. They could basically install a tiny desk with 2 registers and that would already be too much (if they have 2-3 self checkouts too).

Actually what it sounds like they did here was make this like an east coast Rite Aid. That few SKUs of Thrifty Ice Cream is what east coast stores get too.

Before the last management team, the Rite Aid units in the west were always larger sized than the ones in the east and had more SKUs. Also under that CEO Standley who kept trying to sell the company, they started to build some stores back east that were larger and held more SKUs to be more similar to the ones on the west coast (since those were higher volume).

I am not sure the last management team of Rite Aid understood the differences between the east and west coast operations, or the history and customer expectations/differences in the two markets.

[BillyGr]

What is the point of the giant checkout area? Is there something going on there that we are missing/something intended to be going on that isn't getting any customer use, so it appears as if it is all wasted space? Photo? Storage for Amazon pickups? Mailing services? Is the safe/office area there? They hardly have any volume. They could basically install a tiny desk with 2 registers and that would already be too much (if they have 2-3 self-checkouts too).

Actually, what it sounds like they did here was make this like an east coast Rite Aid. That few SKUs of Thrifty Ice Cream is what east coast stores get too.

Perhaps they were just copying existing stores (where something like photo would have taken up far more room in the older freestanding stores when film processing was still a thing).

The newest one locally does have an enclosed office at the end opposite the entry - registers are in between (no self-checkouts here in any of the pharmacy chains except CVS), I think there are three, but fairly spaced out along a counter.

It probably makes some sense if much of the management has been more involved or from the eastern areas, as they would be used to that size store vs. the larger western ones.

If all the chains had opted to make their (inherited) western stores more like their original ones from the eastern/midwestern areas, it wouldn't make much difference, but if only some are converted/replaced then people have the option of which to choose.
Basically, the way Walgreens did years ago when they opted to get rid of foodservice - did it all in one go, not just opening new stores without it and then closing the others over time.

[ClownLoach]

We used to have a Thrifty Jr in Long Beach Belmont Shore, and I guarantee you that it had 50% more SKUs than that useless new prototype.

The big issue they've got to address is that on a 12,000 Sq ft sales floor they waste at least 4,000 Sq ft with the giant empty landing pad and super sized combination checkout, customer service, ice cream and self checkout island plus Cafe space. You can more or less walk around the entire thing if they hadn't put a gondola at the far end to "corral" liquor. It's more work than it should be. Plus it looks very cheap except for the hanging ceiling grid with fake plants and stuff but you know how those worked out in the 80s... The quality of materials shown in the investor materials for the prototype clearly was slashed to cheap looking extruded foam letters and such for signage, cheap flooring and lighting. Major downgrade from new build Wellness stores and their bamboo look flooring, recessed LED can lights and so forth.

At an absolute minimum it needs full height gondolas, endcaps and such. They also need to figure out how to expand refrigeration because it has very little, not even more than a dozen SKUs of the famous Thrifty Ice Cream.

What is the point of the giant checkout area? Is there something going on there that we are missing/something intended to be going on that isn't getting any customer use so it appears as if it is all wasted space? Photo? Storage for Amazon pickups? Mailing services? Is the safe/office area there? They hardly have any volume. They could basically install a tiny desk with 2 registers and that would already be too much (if they have 2-3 self checkouts too).

Actually what it sounds like they did here was make this like an east coast Rite Aid. That few SKUs of Thrifty Ice Cream is what east coast stores get too.

Before the last management team, the Rite Aid units in the west were always larger sized than the ones in the east and had more SKUs. Also under that CEO Standley who kept trying to sell the company, they started to build some stores back east that were larger and held more SKUs to be more similar to the ones on the west coast (since those were higher volume).

I am not sure the last management team of Rite Aid understood the differences between the east and west coast operations, or the history and customer expectations/differences in the two markets.

It's very much an East Coast drugstore which is why it's pretty useless. They knew they were going next to a Grocery Outlet and would have been better served to stock the store to offset their shortfalls. I'm sure they have this experience. The "boat" at the front is just bizarre. It is completely unnecessary and only is accessible from one side and end. The back is what enables space for the Cafe area for people to sit and eat ice cream (nobody does). It makes no sense. I believe the office is at the back by the pharmacy. I haven't been back in a while because it's out of my way and if I walked in with a pocket full of hundreds I still would probably walk out empty handed because it's such a worthless store. If they're doing more than a thousand dollars a day outside of pharmacy I'd be surprised, it's that bad. And they are behind a newly built McDonald's that has been slammed since day one with at least half a dozen cars or more in line at all times, so can't say no one knows they're there.

[storewanderer]

It's very much an East Coast drugstore which is why it's pretty useless. They knew they were going next to a Grocery Outlet and would have been better served to stock the store to offset their shortfalls. I'm sure they have this experience. The "boat" at the front is just bizarre. It is completely unnecessary and only is accessible from one side and end. The back is what enables space for the Cafe area for people to sit and eat ice cream (nobody does). It makes no sense. I believe the office is at the back by the pharmacy. I haven't been back in a while because it's out of my way and if I walked in with a pocket full of hundreds I still would probably walk out empty handed because it's such a worthless store. If they're doing more than a thousand dollars a day outside of pharmacy I'd be surprised, it's that bad. And they are behind a newly built McDonald's that has been slammed since day one with at least half a dozen cars or more in line at all times, so can't say no one knows they're there.

They have good experience competing against Grocery Outlet. Actually that is the wrong way to put it. They have good experience being next to Grocery Outlet and knowing how to generate sales from Grocery Outlet customers. The primary drivers are liquor, pharmacy, and believe it or not- consumables/groceries. Basically when Grocery Outlet does not have an item, the customer will try Rite Aid for said item. Rite Aid still runs some pretty strong promotions on consumables. In stock has been an issue, but I usually have no issues (since the store has so few customers). I cringe how often I take the last item off the shelf though when I shop there.

They have been moving office to the back in newer stores/some remodels.

[ClownLoach]

It's very much an East Coast drugstore which is why it's pretty useless. They knew they were going next to a Grocery Outlet and would have been better served to stock the store to offset their shortfalls. I'm sure they have this experience. The "boat" at the front is just bizarre. It is completely unnecessary and only is accessible from one side and end. The back is what enables space for the Cafe area for people to sit and eat ice cream (nobody does). It makes no sense. I believe the office is at the back by the pharmacy. I haven't been back in a while because it's out of my way and if I walked in with a pocket full of hundreds I still would probably walk out empty handed because it's such a worthless store. If they're doing more than a thousand dollars a day outside of pharmacy I'd be surprised, it's that bad. And they are behind a newly built McDonald's that has been slammed since day one with at least half a dozen cars or more in line at all times, so can't say no one knows they're there.

They have good experience competing against Grocery Outlet. Actually that is the wrong way to put it. They have good experience being next to Grocery Outlet and knowing how to generate sales from Grocery Outlet customers. The primary drivers are liquor, pharmacy, and believe it or not- consumables/groceries. Basically when Grocery Outlet does not have an item, the customer will try Rite Aid for said item. Rite Aid still runs some pretty strong promotions on consumables. In stock has been an issue, but I usually have no issues (since the store has so few customers). I cringe how often I take the last item off the shelf though when I shop there.

They have been moving office to the back in newer stores/some remodels.

Makes sense, but this Rite Aid has the most pathetic selection of groceries, household goods, and liquor I've seen in a drugstore. It's like a 7-Eleven with a pharmacy. If that was my store they probably would have fired me by now for not shutting up, I'd be screaming for more merchandise, taller gondolas, more shelves and so on.