Rite Aid Bankruptcy Means Pharmacies Will Keep Dwindling
The third-largest pharmacy chain in the United States has sought bankruptcy protection due to a confluence of factors, including high debts, declining sales, intensifying competition, and pending legal action.
Know about Rite Aid Bankruptcy Means Pharmacies Will Keep Dwindling
Sunday saw the filing of a Chapter 11 bankruptcy petition by Rite Aid, the third-largest drugstore chain in the United States. The company will likely be forced to close a significant number of its 2,000 locations.
People will have fewer options for where they can get their prescriptions filled as a direct consequence of this. In recent times, this has been the pattern in pharmacies, and this trend will continue in the future.
In September, it was reported by the Wall Street Journal that Rite Aid could close between 400 and 500 stores as part of the bankruptcy proceedings. (The report hasn’t been validated by the company yet.)
CVS is closing 300 stores every year, a process that started last year and is expected to continue into next year. Walgreens announced in June that it would close approximately 150 stores across the United States by the summer of the following year.
At the same time, supermarkets and department stores like Walmart and Target are incorporating pharmacies into their physical locations, and an increasing number of individuals are using mobile applications to have their prescription drugs delivered directly to their homes.
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The disappearance of the neighborhood drugstore as a viable business
When a consumer sees this news, they might think to themselves, “So what? Going to the pharmacy is a chore for everyone. And that is a significant part of the point.
According to Neil Saunders, managing director of the consulting company GlobalData, pharmacies have made the same mistake multiple times despite repeated warnings.
The result is that customers do not want to shop at those establishments, which has created a lot of opportunities for rival businesses.
According to comments made by Saunders to NBC News, “You go into the store, and typically they are poorly lit, and they are fairly depressing.
There isn’t a lot of great customer service. The products are locked very frequently. There isn’t enough staff to help. The prices are very expensive in comparison to other retailers.”
“They are now reaping the consequences of all those years of poor decisions and underinvestment, and they have shot themselves in the foot,”
Poor decisions, crushing debt, and failed deals all contributed to the failure
The fact that Rite Aid, a chain that has been in business for sixty years, has finally filed for bankruptcy was not unexpected because the company has been struggling financially for quite some time.
It had already been closing stores to cut spending before it was forced to take charge of one billion dollars related to its role in the opioid crisis, and it had lost money in each of the previous six fiscal years it had been in operation.
Rite Aid had a much more difficult time reaching an agreement with the plaintiffs than CVS and Walgreens did in a similar situation.
Rite Aid has been valued in the tens of millions of dollars by the stock market in recent years despite the fact that the company had sales of $24 billion in the previous year.
The acquisition of the Brooks and Eckerd chains by Rite Aid in 2007 is likely the turning point that led to the company’s demise.
In order to finance the acquisition, the business took out a loan, and it also took on a portion of the debt owed by Brooks and Eckerd’s previous parent company, the Canadian pharmacy chain Jean Coutu Group.
Walgreens and Rite Aid had reached an agreement for the latter to acquire the former, but the sale ultimately fell through.
In the end, Walgreens sold almost 2,000 stores, while Rite Aid pursued other deals in an attempt to stabilize its business but was ultimately unsuccessful.
As of the 3rd of June, the company’s long-term debt amounted to $3.3 billion
Because of all of its debt, Rite Aid found it more difficult to make investments in its stores, as well as to expand into new businesses and branch out in the way that its competitors did.
Throughout its history, CVS has acquired a pharmacy benefits manager and a health insurer, and it currently operates more than one thousand in-store clinics. Both Walgreens and CVS have expanded their services to include various forms of primary care.
But, according to Saunders, all three of them have been putting the healthcare aspects of their businesses ahead of the retail sales aspects of their companies, so they have neglected their stores.
They are not effective merchants in any way. “None of them,” was his response. “They just haven’t really evolved and changed with the times at all.”
As Rite Aid continues to reduce the size of its stores, its competitors will have more opportunities to increase their revenue as a direct result. According to Saunders, there will never be a time when there is no need for traditional pharmacies.
“We’re still going to have a physical pharmacy retail space, but it’s going to be somewhat smaller than it has been traditionally,” said the executive.
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