What is all of this talk about Rite Aid going bankrupt?

Let me clarify in the 1st sentence that, as of Oct-2014 they are expecting higher sales in the coming days and as a result, ‘sell side’ is bullish on the company’s stock price and future.

It was reported in 2010 that Rite Aid took a really big loss in profits of over $200 million, which is at least 24 cents per each share. At this point in time, the company came to the conclusion that this big fall had a lot to do with the fact that the flu and winter season for the year was quite mild.

This meant that not many people needed to stock up their medicine cabinets. The Chairman for Rite Aid, Mary Sammons commented that the Rite Aid is the 3rd largest drugstore chain in the world but they have struggling for some time now, considering this is the 11th quarterly loss that Rite Aid has suffered with no break. One cannot help but believe that the purchase they made in 2007 of Brook’s Eckerd chain is what is causing them to continuously lose a lot.

Mary states that two thirds of Rite Aid’s total sales are linked to the number of prescriptions filled and over the counter medications. In 2009, the company fell below almost 2% in their total sales. Rite Aid finds itself slipping further behind Walgreens and CVS. Because of this, they shut down 22 of its stores in 2009. They still had over $4,000 more to work with.

The company commented that they would be shutting about 80 more stores in 2010. If the company does not find a solution soon, they expect their losses to continue in this manner. A retail industry consultant Howard Davidowitz comments in 2011 that if Rite Aid wants to stay in business, they will need to invest a lot of cash that they simply do not have.

Otherwise, many of the 90,000 people that are employed with the chain will find themselves looking for new jobs. As it stands, CVS and Walgreens are not the competitors that Rite Aid has to worry about. It is major retailers like Wal-Mart and Target, and the main reason is because of their pharmacy sales. Not to mention, these retailers are focusing on building bigger and better stores.

In 2011, stores that have had their doors open at least a year have shown some significant improvement in sales. However, the company still managed to loss a good bit of money last year. CEO of Rite Aid John Standely comments that he realizes that he has his work cut out for him, but the improvement of the business will be more of a personal assignment.

It will have to happen store by store. However, he has implemented a loyalty program for individuals filling their prescriptions. There is still a lot of debt that the company is still facing that prevents them from running up against retailers like Walgreens and CVS. However, bankruptcy is not something that they have to worry about in the near future. Right now they are surviving and that is what is most important.

The best results will not happen overnight but at least they do not have to auction off most of their stores.