The end came relatively peacefully on October 2. That’s the day that Rite Aid announced that it has shuttered its last 89 stores and ceased being a business entity.
The closure follows a May 5 bankruptcy filing, its second in 19 months. The drug merchant, which operated headquarter offices in Philadelphia and Camp Hill, PA, at that time announced it would close or sell all of its remaining stores -1,245 at the time – along with three distribution centers that employed nearly 25,000 associates, and attempt to sell its customer prescription files, inventory and other assets.
After four months, that process has concluded with Rite Aid having sold its prescription lists from approximately 1,100 units to five major retailers – CVS, Albertsons, Walgreens, Kroger and Giant Eagle.
Even though it had only been less than two years since Rite Aid emerged from its October 2023 bankruptcy, survival was a major concern when that original filing was made and Rite Aid said it would seek to reorganize (it had lost $750 million in 2022).
During that first Chapter 11, 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 $2.5 billion in debt and was owned by its bondholders. Even after that restart, the momentum never came back.
The downfall of Rite Aid played out over a 30-year period beginning in 1995 when second-generation family member Martin Grass, took the helm. His father, company founder Alex Grass had opened his first drug store as a young pharmacist – a Thrift D unit in Scranton, PA in 1962.
The elder 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, Martin Grass continued his father’s aggressive 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 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 Rite Aid. 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 units. However, the debt burden and the closure of overlapping stores caused Rite Aid’s shares to freefall, with the company losing 75 percent of its value between 2007 and 2008.
As 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 were geared to help 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 Rite Aid’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 most recently served as executive VP-chief financial officer, was appointed as CEO of the chain.
After more than a year 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, it announced its intention to liquidate its assets.
The ending is a sad one, especially for a company that once operated more than 5,000 stores and employed a workforce that exceeded 110,000 associates.