Bare shelves at the Ceres Rite Aid reminiscent of the pandemic retail apocalypse are evidence that the chain continues to struggle to remain in business.
Shoppers have noticed a steady decline in products in the Mitchell Road store as Rite Aid after the chain filed bankruptcy on Oct. 15, 2023.
“We’re still here,” said one Rite Aid clerk who managed to smile. “We don’t know how long but we’re still here.”
Jeffrey Stein was hired as the new CEO and Restructuring Officer, to help save the chain. Hundreds of stores which failed to be profitable were shuttered in the past year but Ceres and Turlock stores remain open. After filing bankruptcy, the chain went from 2,271 stores to 1,687 this summer.
Stein has a reputation for rescuing distressed corporations during the bankruptcy process and helped to restructure GWG Holdings, Liberty Steel Group, Whiting Petroleum Corporation, Philadelphia Energy Solutions and Westmoreland Coal Co.
Rite Aid’s financial woes are multi-fold. The chain was doing better during the COVID-19 pandemic when vaccinations brought a lot of foot traffic into stores. But sales have stagnated since at a time when Amazon offers the convenience of home delivery of many products sold in brick and mortar store. Rite Aid also faces stiff competition from CVS and Walgreens as well as supermarket and retail pharmacies like Walmart and Target.
Rite Aid has also been shelling out about $200 million annually on high interest rates on $4 billion in long-term debt. The chain also faces a heap of federal lawsuits for allegedly filling illegal opiate prescriptions between 2014 and 2019.
Other factors affecting the bottom line include the rising costs of labor, inflationary pressures and retail theft, especially in California. According to David Silverman, a senior director at Fitch Ratings, drug retail companies have suffered greater levels of theft than other types of business and when products are locked up the shopping experience becomes cumbersome.
As for the bare shelves, rumors about Rite Aid’s impending restructuring have caused many vendors to require cash upon (or before) delivery instead of allowing Rite Aid to receive goods on credit and pay later. Stein said this “trade contraction” resulted in $100 million in losses over a two-month period.
Rite Aid has been selling off some of its assets, including Health Dialog business assets to Carenet Health; and Elixr, its pharmacy benefit management subsidiary, to MedImpact Healthcare Systems for $575 million.
In June a judge said he’d approve a restructuring deal that cuts about $2 billion in debt and gives the pharmacy access to about $2.5 billion in exit financing to fund a turnaround plan.
The deal also includes a series of settlements resolving investigations by federal authorities and more than 1,000 civil lawsuits related to opioid prescriptions.
In retrospect, Rite Aid corporate leaders made the fateful decision – after failing to merge with Walgreens in 2017 – to sell nearly half of its stores to Walgreens for $5.18 billion. The shrinking sale of stores hurt Rite Aid’s ability to compete with chains more focused on growth.
