In a significant move, Rite Aid is once again seeking protection through bankruptcy as it endeavors to divest a major portion of its assets. However, the company assured customers on Monday that operations would continue across its retail stores even as it returns to Chapter 11 bankruptcy to navigate its financial hurdles.
During this period, Rite Aid plans to ensure a smooth transition for its customers by arranging the transfer of prescriptions to other pharmacy outlets. To support itself through the sale and bankruptcy proceedings, the company has secured $1.94 billion in new financing from certain lenders.
Originally, Rite Aid filed for bankruptcy protection in October 2023, devising a plan to restructure and sell parts of its business. Prior to this filing, the company operated over 2,300 locations across 17 states. At that time, Rite Aid initiated a voluntary Chapter 11 filing to significantly reduce its debt and address ongoing litigation. Consequently, it sold its Elixir Solutions pharmacy benefits management business for approximately $576 million.
Emerging from Chapter 11 about a year later, Rite Aid transitioned to a privately held company, claiming to have transformed into a leaner entity with a better-sized store network, improved operational efficiency, and reduced debt burden, equipped with additional financial resources. Ownership of the chain shifted to its creditors, leading to a downsizing to 1,245 stores spread across 15 states, as reported on its website.
Despite the strategic refocusing on its retail pharmacies, as stated by a spokesperson in March, some stores have reported issues with maintaining inventory. Notably, a store situated near Rite Aid’s Philadelphia headquarters was observed with empty white shelves and a limited selection of products, such as beauty items and drugstore essentials.
Retail analyst Neil Saunders criticized this situation, noting that such empty displays could deter customers from returning. Saunders, managing director at GlobalData, remarked that these conditions effectively “push customers away.”
Rite Aid’s struggles come amid a challenging environment for drugstores, facing slim margins on prescription drugs, rising theft rates, opioid-related legal settlements, and a market shift as consumers opt for online shopping and budget retailers. Competitors like Walgreens, which boasts a store count more than six times that of Rite Aid, has agreed to a takeover by the private equity firm Sycamore Partners as of March.
Founded in Philadelphia in 1962 as Thrif D Discount Center, Rite Aid has battled financial difficulties, accruing annual losses and debt, leading it to cut costs and shutter stores even before its initial bankruptcy filing. Attempts to sell the company, including a $9.4 billion acquisition proposal by Walgreens and a thwarted merger with Albertsons in 2018, did not come to fruition, leaving the company to face its challenges independently.
The company’s efforts to rebound amid these long-standing pressures continue, as it seeks pathways to stabilize operations and reemerge from its current financial predicament.