Case Study: Rite Aid Closings Sweeping Nation
Posted by beachwoodhistoricalalliance on May 14, 2009
Today we’re going to look at two news stories on the recent wave of Rite Aid closings currently rippling through the nation, and one news analysis on the overall state of the retail pharmacy chain. Many of the sites being closed are less than a few years old, and stand at what used to be downtown centers that once held locally important heritage structures.
As our own borough town center faces the continued threat of demolition for the self-interest of this corporation, we should ask ourselves as a community if we’re willing to trade our unique and irreplaceable past for a structure predesigned and built in repetition across America, by an irresponsible non-local company that is currently issuing waves of layoffs and closings that very directly impact the lives of local residents who depend on it.
It certainly appears that Rite Aid, which overextended itself by greedily grabbing up and demolishing culturally and historically significant sites across the nation during economic boom years, is turning into its own ugly moniker, Blight Aid, as many of these sites now go dark, leaving a wasteful legacy behind in local communities left holding undesirable and oversized chunks of abandoned commercial real estate where links to their past once stood.
By Jeff Bishop
Reprinted from the Times-Herald of Coweta County, Georgia
When Darren Beckom left work at Rite Aid last fall after an eight-hour shift, he had no inkling anything was amiss.
Then he got home and checked the message on his phone. “It was my supervisor,” said Beckom. “He told me not to go back to work until further notice.”
Beckom said the layoff came as a complete surprise. “I left work and things were fine, I had a job, and the next thing I know, they hand me a 15-week severance,” he said. Now history is repeating itself — only this time, it’s everyone who works at the Newnan Rite Aid distribution center that’s out of a job.
“As a matter of fact, I just got off the phone with one of my friends who works out there,” Beckom said Thursday afternoon. “It was a total shock. A total shock.”
Thursday morning an assembly was called in the break room. Everyone knew something was up when Wilson Lester, senior vice president of the Rite Aid supply chain, showed up, he said.
“He’s the big dog,” said Beckom. “And he dropped the bomb on them.” Beckom said the corporate representatives told the employees they were “not going to sugar-coat it — they will be closing.”
“So nearly 300 people are going to be out walking the street,” said Beckom.
“This morning, one of my better friends from out there called. He’s a supervisor,” said Beckom.
Beckom now works as a Realtor for Josey, Young & Brady, and he wound up selling the Rite Aid employee a house last June. “He relocated from up north for this job, and now he calls me and he doesn’t have a job anymore,” said Beckom.
“It hurts me, right along with them,” he said. “This recession has hit me directly inside my home. And when it hits you like that, and then it hits the people you care about the most, you really feel it.”
He said the layoffs are going to come in stages, “at different times for different people.”
Every employee was handed a pre-printed envelope with individualized information, he said. “So this is not something new,” he said. “They knew they were closing, if they went to the trouble to print up individualized envelopes for each associate, with an individual end date for each one. Some are leaving in August, some in June, on down the line.
“This took some time and some contemplation on Rite Aid’s part, to look at each individual and make that decision about when to let that individual go,” he said.
Beckom said he feels renaming the Eckerd stores with the Rite Aid brand was a big mistake.
“I really do feel like, with that corporate buyout, they overextended themselves,” said Beckom. “People knew Eckerd. When JC Penney bought Eckerd, they let the company keep the name. Everyone in the South knew who Eckerd was. But they put the Rite Aid name on it, and people around here just didn’t know them as well as they knew Eckerd. I feel like if they had remained Eckerd, things would have turned out differently.”
Beckom said the transition will be tough for many of the employees.
“Tim Lassetter, he’s a county commissioner now, but that’s all that man knows,” said Beckom. “And I spent 15 years of my life with the company, but that didn’t buy me any quarter with them.”
Things sometimes have a way of working out for the best, he said. Beckom devoted his full attention to real estate just when the market began to heat up again.
“This turned out to be a good thing for me,” said Beckom. “It kicked me out into reality. I needed to move on, anyway. I’m picking up listings and getting phone calls right and left. So things have a way of working out.”
NEW YORK — After Rite Aid Corp.’s loss doubled in the fiscal fourth quarter, the drugstore operator is planning to shut down as many as 117 stores over the next year as it tries to cut costs.
The Camp Hill, Pa., company said the closings will be scattered around the country, targeting stores with weak sales and those that are close to another Rite Aid. Saddled with debt and acquired stores that are not living up to expectations, Rite Aid is working to cut inventory and expenses.
Rite Aid said its fourth-quarter results were hurt by the recession, along with a fairly mild cough, cough and flu season and the introduction of new low-cost generic drugs.
About 70 of the stores slated for closure used to be part of the Brooks Eckerd chain. Rite Aid bought 1,850 of those stores in June 2007 for $2.36 billion, but they have not done as well as Rite Aid’s older stores, a trend continued in March.
Rite Aid had 4,901 stores in 31 states at the end of February, and the moves will leave it with about 2,000 stores less than rivals CVS Caremark Corp. and Walgreen Co. The retailer plans 20 store openings and 55 relocations in fiscal 2010, which ends next Feb. 28.
Rite Aid closed 200 stores in fiscal 2008, cutting its store count by 158.
The company plans to eliminate 67 stores by the end of May, including 12 stores that were recently sold to Walgreen. Rite Aid also said it will close a distribution center in Newnan, Ga. It has announced two distribution center closings this year, cutting about 360 jobs at an estimated savings of $4.9 million a year.
Rite Aid acquired the distribution centers as part of the Brooks Eckerd purchase.
In the fiscal fourth quarter, Rite Aid reported a loss attributable to common stockholders of $2.3 billion, or $2.67 per share. It lost $960.4 million, or $1.20 per share, a year ago. Because of the plunging value of Rite Aid stock, the company wrote down the value of its assets by $1.81 billion. About $1.2 billion of that expense came from writing down the value of the Brooks Eckerd stores.
Rite Aid shares have been trading under $1 since September and closed at 39 cents on Wednesday. The company plans to boost its share price later this year with a reverse stock split.
Rite Aid shares rose 6 cents, or 15.4 percent, to close at 45 cents Thursday. They set an all-time low of 20 cents last month.
Excluding the write-downs and a number of other one-time costs, Rite Aid lost $116.9 million, or 14 cents per share. Revenue fell 2 percent, to $6.71 billion, in part because of the reduced store count.
Thomson Reuters says analysts expected a smaller loss of 11 cents per share and $6.71 billion in revenue.
Rite Aid’s fiscal 2010 forecast was mostly below analyst estimates. The company said it expects to lose $210 million to $435 million for the year, or between 26 cents and 53 cents per share. It called for $26.3 billion to $26.7 billion in revenue, and said same-store sales would rise 0.5 to 2.5 percent.
Analysts expected a loss of 36 cents per share on $26.68 billion in revenue.
In fiscal 2009, Rite Aid reported a loss of $2.94 billion, or $3.49 per share, compared with $1.11 billion, or $1.54 per share in fiscal 2008. Its revenue rose 8 percent, to $26.29 billion from $24.33 billion.
In a note to clients, Standard & Poor’s analyst Joseph Agnese said Rite Aid’s poor financial condition creates a lot of risk, although sales are slowly improving and the company is making progress at reducing costs.
Reprinted from eDrugsearch.com
March 12th, 2009
Rite Aid is a $24 billion company operating more than 5,000 drugstores in 31 states, making it the third-largest pharmacy chain in the United States. But unless this overpriced retailer receives some bailout money from heaven (’cause it’s sure not coming from Washington), the year 2009 may be its last.
Motley Fool has just put it on its list of 15 companies that might not survive the year. Says the Fool:
Rite Aid. (Ticker symbol: RAD; about 100,000 employees; 1-year stock-price decline: 92%). This drugstore chain tried to boost its performance by acquiring competitors Brooks and Eckerd in 2007. But there have been some nasty side effects, like a huge debt load that makes it the most leveraged drugstore chain in the U.S., according to Zacks Equity Research. That big retail investment came just as megadiscounter Wal-Mart was starting to sell prescription drugs, and consumers were starting to cut bank on spending. Management has twice lowered its outlook for 2009. Prognosis: Mounting losses, with no turnaround in sight.
Rite Aid’s story, full of waste and mismanagement, is a classic illustration of why Americans save so much money through online and mail-order pharmacies. Whether these pharmacies are based in the United States or Canada, they require a fraction of the overhead of a big chain pharmacy — particularly one as poorly run as Rite Aid.
Rite Aid has been in trouble as far back as 1999, when it was busted by the news media (and investigated by state regulators) for questionable business practices like selling date-sensitive products well past their due dates. Rite Aid also had a doozy of an accounting scandal that led to jail time for several top ranking execs, including CEO Martin Grass.
Like many bloated Fortune 500 corporations, Rite Aid tried to put lipstick on the pig by acquiring competitors like Eckerd. It’s a quick way to boost your top line to impress your stockholders without actually doing anything intelligent to help your customers. Rite Aid went deeply into debt in the process, and now they’re on death’s door.
In addition to its own incompetence, Rite Aid has been hurt badly by the trend toward mail-order pharmacies and by Wal-Mart’s $4 prescription drug plan, which savvier retailers (including finally CVS late last year) have copied.
In its own backward way, Rite Aid has been trying to catch up with its lower-cost competitors, but it’s almost undoubtedly too little, too late.
Rite Aid does frequently offer short-term promotions for consumers who transfer their prescriptions (for example, If you transfer two prescriptions to Rite Aid, you receive a $25 gift card for each — a $50 value.) However, their Rx Savings Card only entitles you to an $8.99 price for select generics — more than twice as much as Wal-mart and many others now charge.
That’s the best you’ve got? Good luck with that, Rite Aid. We’ll see you in the business obituary section.