Rite Aid files for bankruptcy as drugstores face existential crisis from online retailers like Amazon

Rite Aid has filed for bankruptcy. The 61-year-old drugstore chain with over 2,000 locations across the US, filed for Chapter 11 bankruptcy protection in New Jersey on Sunday. The move was part of the company’s efforts to restructure and significantly reduce its debt burden.

Alongside the bankruptcy announcement, Rite Aid has named Jeffrey Stein as its new CEO and chief restructuring officer, as well as a member of its board. Elizabeth Burr, who had been serving as interim CEO since January, will retain a position on the company’s board, CNBC reported.

Rite Aid’s financial woes stem from its inability to settle numerous lawsuits related to its role in supplying opioids. Over the years, the company has struggled to maintain sales, and it now plans to close several underperforming stores and bring in new leadership. Despite its extensive reach, Rite Aid is smaller than its competitors, such as CVS and Walgreens.

This bankruptcy marks a pivotal moment for drugstores, as they grapple with an existential crisis caused by consumers increasingly turning to retail giants like Amazon, Target, and Walmart for everyday essentials, often at more competitive prices and with the added convenience of doorstep delivery.

Rite Aid has disclosed that it has reached an agreement with its creditors on a restructuring plan that involves evaluating its retail locations and closing those that are not performing well. Lenders have also pledged $3.45 billion in new funding to ensure sufficient liquidity as the company embarks on its restructuring journey.

The company has been dealing with declining sales, mounting debt, and a barrage of lawsuits that accuse Rite Aid of contributing to the nation’s opioid epidemic by oversupplying painkillers. In its most recent quarter, which ended on June 3, the company reported a drop in revenue from $6.01 billion to $5.65 billion, and its net loss increased to $306.7 million, compared to $110.2 million in the same period the previous year.

In light of these challenges, Rite Aid has revised its fiscal 2024 outlook and alerted investors that it anticipates a full-year loss of between $650 million and $680 million, ending in late February.

Jeffrey Stein, the newly appointed CEO and chief restructuring officer, is expected to play a pivotal role in guiding Rite Aid through this financial restructuring. Rite Aid Chairman Bruce Bodaken expressed confidence in Stein’s ability to lead the company through these difficult times and position it for long-term success, while Stein himself expressed belief in the business and its turnaround strategy.

“Jeff is a proven leader with a strong track record of guiding companies through financial restructurings. We look forward to benefitting from his contributions and leveraging his expertise as we strengthen Rite Aid’s foundation and position the business for long-term success,” Rite Aid Chairman Bruce Bodaken said in a statement.

Stein said he has “tremendous confidence in this business and the turnaround strategy that has been developed in recent months.”