Difficult times sometimes call for difficult moves and ensuing change. That’s what happened on March 12, when Rite Aid Corp.’s board of directors ousted CEO John Stanley. Also departing from the Camp Hill, PA drug chain will be chief operating officer Kermit Crawford, CFO Darren Karst and Derek Griffith, executive VP-store operations.
Standley won’t be exiting until a new chief executive is named – the Rite Aid board said it has begun a search. The beleaguered drug merchant also announced additional management changes, each of which is effective immediately. Bryan Everett, chief operating officer of Rite Aid Stores, has been promoted to chief operating officer of the company, succeeding Kermit Crawford who is leaving. Matt Schroeder, chief accounting officer and treasurer, has been promoted to chief financial officer. Schroeder is succeeding Darren Karst who is leaving the company this spring after supporting a brief transition. Brian Hoover, group VP and controller, has been promoted to chief accounting officer. Jocelyn Konrad, executive VP-pharmacy, has been promoted to executive vice president, pharmacy and retail operations. Derek Griffith, executive VP-store operations, is also leaving the organization.
“Rite Aid’s board of directors is committed to more closely aligning the structure and leadership of the company with our present scale and today’s announcement is an important step in positioning Rite Aid for future success,” said Bruce Bodaken, chairman of Rite Aid’s board, who was elevated to that position last fall after Standley was stripped of those duties. “These are difficult decisions and we recognize the implications they have for individuals across our organization. However, it is imperative we take action to reduce the cost of current operations and become a more efficient and profitable company. The board believes that now is the right time to undertake a leadership transition. We will be focused on recruiting a leader that will best position Rite Aid to create long-term value for shareholders. As we conduct the search process, John has agreed to stay until we appoint his successor. We thank John for his outstanding leadership in guiding the company over the past several years. His leadership and expertise has been critical to ensuring the company’s stability and success through an extremely challenging environment. In addition, we are confident that Bryan, Matt and our senior leadership team have the capabilities and experience necessary to effectively guide Rite Aid forward. On behalf of the board, I want to thank Kermit, Darren, and all the other departing associates for their service and contributions to the company.”
Rite Aid also said will consolidate additional senior leadership roles resulting in the elimination of certain positions. In addition, the retailer announced actions that will reduce managerial layers and consolidate roles across the organization, resulting in the elimination of approximately 400 full-time positions, or more than 20 percent of the corporate positions located at the firm’s Camp Hill headquarters and across the field organization.
Approximately two-thirds of the reductions will take place immediately with the balance by the end of fiscal 2020. As a result of the restructuring, Rite Aid said it expects to achieve annual cost savings of approximately $55 million, of which approximately $42 million will be realized within fiscal year 2020. These cost savings, the retailer noted, will serve to offset an expected reduction in income associated with its diminishing obligations under the Transition Services Agreement (TSA) with Walgreens, which related to the prior sale of stores.
The last three years have been nightmarish for Rite Aid. After Standley, who joined Rite Aid in 2008, became CEO in 2010 and added the chairman title in 2012, he helped nourish the company back to profitability after a long dry spell that was partly created by financial mismanagement dating back to Martin Grass in the early 2000s. Rite Aid and rival Walgreens announced a merger agreement in October 2015, a marriage that would have created a 4,600 national network of drug stores.
That deal was ultimately rejected by the Federal Trade Commission which said a union between the two companies would create too much overlap, even after both parties agreed to divest themselves of more than 1,000 stores.
The deal was partially resurrected early last year when Rite Aid sold 1,932 stores to Walgreens. Shortly after that transaction was completed, Rite Aid said it would seek to merge with grocery giant Albertsons, a privately-held company. However, when Rite Aid shareholders openly voiced their objection to the proposal, the deal was cancelled even before a shareholder vote that had been scheduled for August 2018 was held.
Since then, Rite Aid has been left out on a proverbial island. In early January, the company was put on “delisting” notice by the New York Stock Exchange (for its shares trading under $1 for 30 consecutive days). On March 12, its shares were trading at 68 cents. Shareholders will vote on a reverse stock split on March 21 to regain compliance.
Moreover, Rite Aid’s fiscal year, which ended on March 2 (results won’t be announced for several more weeks) looks dismal. The company has lost more than half of its value over the past 12 months with its market cap is now estimated at $733 million.