A Rite Aid store stands in Brooklyn on August 28, 2023 in Recent York City.
Spencer Platt | Getty Images
Rite Aid filed for Chapter 11 bankruptcy protection in Recent Jersey on Sunday and said it might begin restructuring to significantly reduce its debt.
The corporate said it reached a take care of creditors on a restructuring plan that features evaluating its retail footprint and shutting underperforming locations.
Rite Aid also said lenders agreed to supply $3.45 billion in recent funding to “provide sufficient liquidity” because it embarks on its restructuring plan.
The beleaguered drugstore chain has been grappling with slowing sales, mounting debt and a slew of lawsuits that allege the corporate helped fuel the nation’s opioid epidemic by oversupplying painkillers.Â
During its most up-to-date quarter ended June 3, revenue fell to $5.6 billion, down from $6.01 billion within the year-ago period. Net losses widened to $306.7 million, or $5.56 per share, in comparison with a net lack of $110.2 million, or $2.03 per share, in the identical period a 12 months earlier.Â
Consequently of the rough quarter, Rite Aid lowered its fiscal 2024 outlook and warned investors it expects to lose between $650 million and $680 million for the total 12 months, which is slated to finish in late February.
Rite Aid’s retail pharmacy segment has long been a key growth driver for the corporate, but that hasn’t been enough to offset its mounting losses.
Plummeting demand for Covid vaccines and testing, a membership reduction in the corporate’s prescription drug plan and a loss of consumers from its Elixir pharmacy advantages business have contributed to a slowdown in revenue on the struggling drug chain.
On Sunday, the corporate appointed Jeffrey Stein as its recent chief executive officer and chief restructuring officer in addition to a member of its board. Elizabeth Burr had been serving as interim CEO since January and can remain on the corporate’s board.
Rite Aid Chairman Bruce Bodaken said in an announcement, “Jeff is a proven leader with a robust track record of guiding corporations through financial restructurings. We stay up for benefitting from his contributions and leveraging his expertise as we strengthen Rite Aid’s foundation and position the business for long-term success.”
Stein said he has “tremendous confidence on this business and the turnaround strategy that has been developed in recent months.”
An existential crisis for drugstoresÂ
Drugstores like Rite Aid have faced an existential crisis as shoppers increasingly turn to retailers like Amazon, Goal, Walmart and others for toothpaste, shampoo and other staples — often at a less expensive price and with the convenience of delivery to customers’ doors.
Rite Aid has also struggled to maintain up with its larger rivals, CVS and Walgreens, as those corporations have pivoted to a health care focus and made sizable investments to match.
CVS has opened in-store Minute Clinics, which resemble walk-in urgent care facilities, and turned more of its stores into HealthHubs, or locations with an extended list of medical services.Â
It has expanded its reach in health care by acquiring Caremark, one in all the most important pharmacy advantages managers, health insurer Aetna and, most recently, primary-care company Oak Street Health.
Walgreens has also struck pricey deals to expand its reach in health care. It’s turn into the bulk owner of primary-care company VillageMD and plans to open up doctor offices next to a lot of its drugstores.Â
Newer — and well-capitalized — health-care entrants have also intensified the competitive threat. Amazon closed its acquisition of primary-care provider One Medical in a $3.9 billion deal earlier this 12 months and purchased online pharmacy PillPack in 2018. Walmart, which has pharmacies in its 1000’s of stores, has opened a growing network of medical clinics in parts of the country.
The opioid crisisÂ
Rite Aid’s financial position and competitive disadvantages are compounded by the numerous lawsuits it’s facing that allege the corporate contributed to the nation’s opioid epidemic by knowingly filling prescriptions for painkillers that didn’t meet legal requirements.
The Department of Justice filed a suit against Rite Aid earlier this 12 months, claiming that it violated the Controlled Substances Act by filling 1000’s of illegal prescriptions for controlled substances similar to fentanyl and oxycodone.
Rite Aid has asked a court to dismiss the department’s lawsuit and denied allegations that it filled illegal opioid prescriptions.
— CNBC’s Christine Wang contributed to this report.
