Food Trade News
Report: Rite Aid Contemplating Chapter 11 To Shrink $3.3B Debt
Rite Aid, the troubled drug chain, is planning to file for bankruptcy protection in the coming weeks, according to The Wall Street Journal. The catalyst for a future Chapter 11 filing would potentially be a remedy to deal with more than 1,000 federal and state lawsuits that Rite Aid faces over charges that it oversupplied prescription medications (primarily opioids) to its customers. The Journal also noted that a Chapter 11 filing would cover Rite Aid’s more than $3.3 billion debt load.
Philadelphia-based Rite Aid hasn’t agreed on a settlement with federal and state government or private opioid plaintiffs to resolve those opioid liabilities in a potential Chapter 11 and is currently planning to treat them as general unsecured claims, they said.
According to the story, Rite Aid has asked a court to dismiss the Justice Department’s lawsuit and denied the allegations that it filled unlawful prescriptions for controlled substances. A bankruptcy filing would put those lawsuits on hold and open a path for Rite Aid to resolve them in a single forum.
It’s a strategy previously used by pharmaceutical manufacturers Purdue Pharma, Mallinckrodt and Endo International, big pharma firms that filed for Chapter 11 protection to consolidate litigation and ultimately settle legal issues with multiple states and the federal government. Those companies eventually reached settlements of their opioid claims in bankruptcy, worth an aggregate total of more than $8 billion that meant more was allocated to opioid plaintiffs than to other unsecured creditors.
Additionally, the Justice Department has filed a civil suit against Rite Aid alleging that the company dispensed controlled substances in violation of the False Claims Act and Controlled Substances Act.
Rite Aid, which until last year was headquartered in Camp Hill, PA, was founded in 1962 by Alex Grass in Scranton, PA when it was known as Thrif D Discount Center. It grew to become a national firm over a 30-year period through acquisitions and organic growth. It became a publicly traded company in 1968.
However, over the past 25 years, the drug merchant has been plagued by executive scandal, a revolving door of senior leadership and consistently poor earnings results. In January of this year, CEO Heyward Donigan abruptly departed after a three-year run. She was replaced on an interim basis by Elizabeth “Busy” Burr, who has been a Rite Aid board member since 2019. During its most recently completed operating period (Q2) which ended on June 3, Rite Aid’s overall revenue decreased 6 percent and its net operating loss almost tripled to $307 million.
As of September 12, Rite Aid’s stock was trading at $0.59 per share down from $7.65 a year ago.
Ahold Delhaize, Weis Markets Post Solid Comps, Flat Operating Profits
Two of the Mid-Atlantic region’s largest retailers – Ahold Delhaize and Weis Markets – posted healthy comparable stores sales in their most recent operating periods. As we’ve witnessed with many other national and regional chains over the past six weeks, comp store revenue remains solid (although not typically as strong as a year ago) while earnings have dipped to flat or slightly negative levels.
At Ahold Delhaize, overall U.S. second quarter net sales were $14.9 billion, and comp store sales increased 3.6 percent (excluding gas).
Commenting on his company’s results, Ahold Delhaize president and CEO Frans Mueller stated: “In the U.S., Q2 comparable sales grew by 4.0 percent (including gas), excluding the impact of weather and calendar shifts. Powered by growth in loyalty sales and increasing online penetration, we were able to more than compensate for the negative headwinds related to a reduction in the SNAP federal assistance program and moderating inflation rates. Food Lion (with its 43rd consecutive quarter of positive sales growth and the opening of more than 100 additional click-and-collect locations compared to the prior year) and Hannaford, in particular, continue to see strong market share gains as both brands further elevate their omnichannel capabilities. In aggregate, e-commerce penetration in the U.S. reached 8.1 percent for the first half of the year. We also continue to take concrete actions to orient our online fulfillment capabilities toward same-day delivery models. In line with this, we will close a facility in Jersey City, New Jersey, effective March 2024, utilizing our existing Stop & Shop store network and partners to service customers in this catchment area going forward.”
On the earnings side, Ahold Delhaize’s underlying operating margin in the U.S. was 4.6 percent, down 0.1 percentage points at constant exchange rates from the prior year period. In Q2, U.S. IFRS-reported (International Financial Reporting Standards) operating margin was 4.2 percent, mainly impacted by an impairment charge in the amount of $44 million for the Jersey City fulfillment center related to the Accelerate initiative.
At Weis Markets, second quarter overall net sales totaled $1.18 billion, compared to $1.14 billion for the 13-week second quarter in the same period last year, up 3.8 percent. Second quarter comparable store sales increased 3.5 percent on an individual year-over-year basis and increased 11.9 percent on a two-year stacked basis.
Weis Markets chairman and CEO Jonathan Weis said: “In the second quarter, we generated solid results due to the hard work and commitment of our associates at every level of our company. We continue to make strategic investments for long-term profitable growth which benefits our associates, customers, communities, and shareholders. We are keenly aware that our customers are looking for value and savings as they navigate the challenges of inflation, higher interest rates, and reduced government benefits.”
The Sunbury, PA-based retailer’s second quarter net income totaled $34.27 million compared to $36.27 million in 2022, down 5.5 percent. Second quarter earnings per share totaled $1.27 compared to $1.35 per share in 2022.
TERRI’S TAKE
I hope everyone is enjoying the summer, it does seem to be flying by…
We recently heard from the Maryland Food Bank (MFB) as it begins its fiscal year 2024 and they report that high grocery prices continue to plague local families. Despite reports of inflation easing food prices continue to remain high, adding pressure to limited household budgets and resulting in an increased need for food assistance among Maryland families.
According to the MFB’s most recent analysis, of June data from the Census Bureau’s Household Pulse Survey, an estimated 45 percent of Maryland adults said their children were sometimes or often not eating enough because food was not affordable, while 36 percent of Maryland households had difficulty paying for usual household expenses.
“Marylanders are struggling to make ends meet this summer due to a combination of factors, including high grocery costs, the reduction in SNAP benefits, and with kids out of school, a lack of access to free or reduced-price meals,” MFB president and CEO Carmen Del Guercio said. “With limited financial resources, they are often left with no option but to skip meals or choose cheaper, less healthy foods, compromising their well-being.”
Times have been tough especially for those on fixed incomes. According to new ALICE Essentials Index, released last month by United Ways of Maryland, concluded that household essentials in Maryland have increased an average of 3.1 percent every year since 2007. The report also found that a healthy, practical diet for a family of four now costs approximately $1,368 per month in Maryland, although estimates differ by household type and location.
High grocery prices have put a strain on the food bank’s budget as well, with the cost of its most popular products up 16 percent versus two years ago. Even so, the organization is intensifying its efforts to distribute more healthy foods in FY24, proactively managing its menu to ensure a variety of fresh food options from Maryland-based food producers are accessible to MFB community partners.
“We recognize that access to nutritious food has been an ongoing challenge for many of the vulnerable populations we serve, which is why we’re so focused on providing our community partners with high quality, locally-sourced produce, meat, milk, eggs, and even seafood that offer our neighbors the nutrition they need,” Del Guercio explained. “The cost associated with this is significant but manageable, thanks to the Local Food Purchase Agreement in partnership with the USDA, the State of Maryland and the Maryland Department of Agriculture. We think it’s worth it because when people eat better, they live better lives.”
In other MFB news, check out the photo on this page of Food World – kudos to the Perdue Foundation for its recent gift to MFB, which will go toward its Mobile Market Program in addition to supporting its FoodWorks Culinary Training Program and its School Pantry Program serving Wicomico County Public Schools. The event highlighted the recent gift and the decades-long partnership between the fourth-generation, family-owned U.S. food and agriculture company and the statewide anti-hunger organization. The food bank currently has three Mobile Markets that travel across Maryland, with one dedicated to the Eastern Shore and two that serve counties in the northern, southern and western regions of the state.
I hope everyone has already marked your calendars for this year’s Children’s Cancer Foundation Gala, scheduled for November 4 at Martin’s Crosswinds in Greenbelt. In advance of the big event, CCF has announced the recipients of its 2023 Research Awards. The 2023 CCF Research Awards, combined with funding for local programs for children fighting cancer, total $1 million.
The 11 pediatric oncology researchers, each conducting work in the Baltimore-Washington region, will be presented with their grants at gala. They are: Chris Albanese, PhD, Georgetown Lombardi Comprehensive Cancer Center; Curt I. Civin, MD, University of Maryland School of Medicine; Charles Eberhart, MD, PhD, Johns Hopkins Sidney Kimmel Comprehensive Cancer Center; Gary Kupfer, MD, Georgetown Lombardi Comprehensive Cancer Center; Yiouli P. Ktena, MD, Johns Hopkins Sidney Kimmel Comprehensive Cancer Center; CCF Giant Food NextGen Awardee Nicolas Llosa, MD, Johns Hopkins Sidney Kimmel Comprehensive Cancer Center; Chase McCann, PhD, Children’s National Hospital; Anandani Nellan, MD, PhD, National Cancer Institute; Patience Odeniyide, MD, Johns Hopkins Sidney Kimmel Comprehensive Cancer Center; Haneen Shalabi, DO, National Cancer Institute; Aykut Üren, MD, Georgetown Lombardi Comprehensive Cancer Center; Yiouli Ktena, MD, of Johns Hopkins, will receive the CCF Giant Food NextGen Award, created for a promising young pediatric cancer researcher to fund both their research and their professional advancement in the field. Dr. Ktena will be the 11th recipient of this joint effort between CCF and Giant Food.
The CCF Research Awards are selected by an independent panel of prominent pediatric cancer researchers from outside the Maryland, DC, and N. Virginia area. Additionally, CCF will present five non-research awards to local programs at the following: The Children’s Inn at NIH, The Claire Marie Foundation, Nigel’s Neighborhood, Horizon Day Camp and the Kennedy Krieger Institute. Since its founding in 1983, CCF has awarded researchers, programs and facilities with more than $43M.
Mark those calendars! And, if you would like to help, consider being a sponsor this year. For more information, email [email protected], or go to the ad on page 7 of this issue and click on the QR code at the bottom of the page to download the sponsorship form.
That’s it for this month – let me know if you hear anything interesting by emailing me at [email protected].
C&S Names Eric Winn To Replace Retiring Bob Palmer As Chief Exec
C&S Wholesale Grocers announced that Eric Winn, currently the company’s COO, will assume the role of chief executive when current CEO Bob Palmer retires later this year.
“The foundation of C&S’s success has always been our people. Today’s announcement demonstrates that this legacy remains strong. Bob was appointed CEO during extraordinary times — the pandemic and the resulting impact on our industry. Bob was critical in effectively leading C&S through these challenges and driving long-term growth.” said Rick Cohen, chairman, C&S Wholesale Grocers. “Bob has been a well-respected leader and customer partner. I am excited to have his continued dedication, leadership and guidance as a member of our board of directors.”
Since his appointment as CEO in October 2020, Palmer has been responsible for all aspects of the company strategy, growth plan, customer satisfaction and day-to-day operations. He has more than 30 years of industry experience, including serving as C&S’s chief procurement officer and head buyer. After officially stepping down from his CEO duties, he will continue to provide expertise as a member of the C&S board of directors.
This marks the second time Palmer has retired as CEO of C&S. He originally stepped down from the Keene, NH-based wholesaler in September 2019 after a 33-year career with the privately-held distributor and Mike Duffy was named to replace him. But, by October 2020, Palmer was back at the helm. Duffy’s strength had been viewed to be in the strategic supply chain arena, not as an operator or merchant. But Palmer, known for his procurement and strong customer relations skills, returned to replace Duffy less than two years later.
In his current position as COO, Winn is responsible for all operations, transportation, customer development and expansion. Since joining C&S in 2004, he has held several leadership positions across the company. Prior to this, he served as president, commercial, leading the commercial organization in support of independent and chain customers, as well as driving C&S’s further expansion in the retail market.
“Eric has been visionary in transforming our operations to drive long-term sustainable growth. He has been deeply invested in ensuring that C&S will continue to be a market leader, while developing a pipeline of strong talent in every aspect of our operations,” commented Cohen. “I look forward to Eric continuing C&S’s strong legacy of braggingly happy customers.”
Winn will assume the role of CEO upon Palmer’s retirement on October 2. In the coming months, the two men will be working together on a smooth transition, C&S said.
