Drug chain Rite Aid is preparing a Chapter 11 bankruptcy plan in which it would shut hundreds of stores and liquidate its remaining operations, the Wall Street Journal reported.
Citing unnamed sources, the Journal said Friday that under the bankruptcy plan Rite Aid would close 400 to 500 of its more than 2,100 stores in 17 states and divest the remainder of its locations and operations or turn them over to creditors. Talks are continuing with bondholders over the number of stores to be closed, which could be higher, and auctions are planned for Rite Aid’s Elixir pharmacy services unit and other assets, the report said.
The news comes about a month after the Journal reported that Rite Aid was getting ready to file for Chapter 11 bankruptcy to halt over 1,000 federal and state lawsuits claiming the Philadelphia-based company helped fuel the nation’s opioid overdose epidemic by oversupplying controlled-substance prescription painkillers. The pharmacy retailer and health care services company also has been weighed down by a $3.3 billion debt load, a lackluster quarterly performance, and other market and economic factors.
As of Monday morning, Rite Aid hadn’t issued any announcements on a pending bankruptcy filing. However, Joy Errico, senior vice president and chief communications officer at Rite Aid, stated in an email to Winsight Grocery Business that the company is working to shore up its finances.
“Rite Aid is continuing to work collaboratively and constructively with our financial stakeholders to identify the best path forward to reduce our debt and position the business for continued success,” Errico said in the email statement. “Given the conversations remain ongoing, no decisions have been made at this time, and we are focused on reaching an agreement with our financial stakeholders that will make Rite Aid stronger. We are confident we are taking the right steps to help us succeed, both now and in the future.”
The Journal has noted that Rite Aid, which also faces a civil suit from the Department of Justice, potentially could address the opioid cases “in a single forum” via a bankruptcy filing. The company has called for the DOJ suit to be dismissed. In addition, a bankruptcy filing could provide Rite Aid an avenue for exiting unfavorable long-term store leases, the Journal said.
Rite Aid’s stock price stood at about 43 cents per share in morning trading after opening at 53 cents on Monday. Before the Journal’s report on Friday, the company’s share opened at 65 cents and ended up closing at 59 cents.
For its fiscal 2024 first quarter ended June 3, Rite Aid posted a bigger net loss, nearly tripling from a year ago, and saw revenue drop 6% year over year. The company also had recorded a 39% larger net loss for its 2023 fiscal year, with revenue down 2% year over year.
Rite Aid, too, remains under the leadership of an interim, CEO Elizabeth “Busy” Burr, who took over with the departure of Heyward Donigan early this year.
In particular, Rite Aid has struggled since a pair of failed mega-mergers. In August 2018, pressure from Rite Aid shareholders compelled the company to kill a $24 billion merger deal with Albertsons Cos. The aborted merger with Albertsons came after the Federal Trade Commission in June 2017 derailed a $17 billion agreement by Walgreens Boots Alliance to acquire Rite Aid. To gain FTC approval, the companies downsized their deal to the sale of 1,932 Rite Aid stores to Walgreens. The transaction slashed Rite Aid’s drugstore base by more than 40% and hampered its ability to compete with much bigger rivals CVS Health and Walgreens. Rite Aid has since seen its sales fall from around $32 billion to more than $24 billion.