What started with a single Thrift D drug store in Scranton, PA in 1962 owned by a young lawyer and businessman, Alex Grass, is facing extinction in the next few months.
Last month, the Pennsylvania-based retailer, which has headquarters in Philadelphia and Camp Hill, filed for bankruptcy, the second time in 19 months.
This time there’ll be no restructuring, or an attempt to survive another round of deep cuts. In fact, the once mighty drug chain has already begun to liquidate its operations, dealing stores and selling prescription lists to other retailers. At the time of the bankruptcy filing, Rite Aid operated 1,245 stores in 15 states.
According to Matt Schroeder, Rite Aid’s ninth and final CEO, “A key priority for Rite Aid is to ensure that as many of our loyal customers as possible continue to receive the pharmacy services and care they require without interruption. These agreements ensure our pharmacy customers will experience a smooth transition while preserving jobs for some of our valued team members.”
Stores have already begun closing and at presstime, six major retailers (and competitors) – CVS, Albertsons, Walgreens, Giant Eagle, Weis Markets and Kroger – have acquired prescription lists at slightly more than 1,000 Rite Aid stores. As of June 20, more than 700 Rite Aid stores have closed or have been slated to close in the next two months.
Since Rite Aid is operating under the umbrella of the U.S. Bankruptcy Court in Trenton, NJ, each deal must be approved separately.
CVS has been the most active buyer to date, acquiring prescription lists for about 625 Rite Aid stores nationally as well as agreeing to purchase 64 Rite Aid locations in Idaho, Oregon and Washington.
At presstime, the number of prescription files sold to Albertsons, Walgreens and Kroger has not been disclosed. Pittsburgh-based Giant Eagle acknowledged it has also acquired 78 prescription files from Rite Aid locations in Western PA and Ohio. Weis stated its has purchased 11 prescription lists from Rite Aid stores in Pennsylvania and New York. It is expected that other retailers buy buy files as well as stores.
Even though it’s only been eight months since Rite Aid emerged from its October 2023 bankruptcy, survival was a major concern for the company when that filing was made and the drug chain said it would seek to reorganize (it had lost $750 million in 2022).
During that process, Rite Aid closed approximately 800 stores nationally, reduced its debt by about $2 billion, sold its pharmacy benefit firm, Elixir, to MedImpact Healthcare Systems, and settled hundreds of opioid-related lawsuits.
However, the drug chain still held a $2.5 billion debt and was owned by its bondholders. Even after that restart, the momentum never came back.
The ending is a sad evolution for a company that once operated more than 5,000 stores and employed a workforce that exceeded 110,000 associates.
From that single store in Scranton, Alex Grass rapidly expanded his operation, changing the name to Rite Aid in the mid-1960s and going public in 1968. At that point, Rite Aid began to grow nationally, primarily by acquiring nearly a dozen regional drug chains.
When Alex Grass stepped down as CEO in 1995, his son Martin assumed the helm. He continued his father’s expansion effort, acquiring Thrifty PayLess, which operated more than 1,000 drug stores in the West.
It wasn’t long before two factors took a toll on Rite Aid – over-expansion and the corruption of Martin Grass. By the late 1990s the company’s stock value had dropped precipitously, and the younger Grass was accused of financial misconduct which included falsifying financial statements. He resigned under pressure in 1999 and ultimately served a six-year prison sentence.
When former Albertsons and Yucaipa Cos. executive Bob Miller was named chief executive in 1999, he immediately ordered a restructuring of the organization which included closing hundreds of stores and financing the retailer’s debt. He also created a stable operating environment, an important factor in Rite Aid’s improvement.
Miller remained CEO until 2003 when another former Yucaipa Cos. leader, Mary Sammons, was named to lead the chain. It was under her leadership that Rite Aid made its biggest acquisition ever – the $3.4 billion purchase of Brooks and Eckerd drug stores which operated about 1,800 locations. However, the debt burden and the closure of overlapping stores caused Rite Aid’s shares into freefall, and they lost 75 percent of their value between 2007 and 2008.
When yet another former Yucaipa Cos. executive, John Standley, became CEO in 2010, Rite Aid continued its failing ways. For most of his nearly nine-year tenure, Standley struggled to keep Rite Aid’s sales and earnings positive, but did help engineer two potential moves that could have helped Rite Aid find a more secure future. The first was in 2015, when Walgreens attempted to acquire its competitor for $9.4 billion. However, the deal was thwarted by regulatory pushback. Instead, Walgreens purchased about 40 percent of the company’s store network (1,932 units) for $4.38 billion. With the store base now severely diluted, Rite Aid’s road became even more difficult financially. In 2018, Standley again tried to engineer a deal to strengthen his ailing company – this time by trying to merge Rite Aid with grocery chain Albertsons. However, Rite Aid’s shareholders rejected the deal, which was subsequently cancelled. Also, during Standley’s reign Rite Aid acquired pharmacy benefit management firm (PBM) Envision Rx in 2015 for $2 billion, which helped to diversify the company’s portfolio. The name of that company was changed to Elixir in 2020.
Next up for the beleaguered firm was Heyward Donigan who was named Rite Aid’s chief executive in 2019. Donigan had spent most of her career in the healthcare industry and she prioritized upgrading the company’s technology and also expanded Rite Aid’s healthcare programs. However, the impact of COVID brought difficult challenges as sales and earnings continued to decline. Donigan abruptly resigned in January 2023 to be replaced on an interim basis by board member Elizabeth “Busy” Burr, another former healthcare executive. It was Burr, during her 10-month tenure, who shaped the company’s move towards bankruptcy.
When that initial filing was made in October 2023, investor and turnaround specialist Jeffrey Stein was named CEO and chief restructuring officer. For his 13-month tenure to lead Rite Aid out of bankruptcy Stein collected $20 million in compensation and bonuses.
When the “new” Rite Aid emerged in September, Matt Schroeder, the 25-year Rite Aid veteran who had most recently served as executive VP-chief financial officer, was appointed as CEO of the chain.
After nine months of trying to survive by closing hundreds of additional stores and tightening other administrative functions, Rite Aid was rapidly burning through its available cash. On May 5, the company pulled the plug, effectively ending a 63-year history begun by an ambitious entrepreneur.
