Dive Brief:
- Rite Aid is closing 63 of its stores, a process that began in November and is expected to add $25 million in annual EBITDA, the company said in its latest earnings release.
- The closures are part of a process aimed at cutting costs, adding profits and ensuring Rite Aid has "a healthy foundation to grow from, with the right stores in the right locations, for the communities it serves and for our business," Rite Aid CEO and President Heyward Donigan said in a statement.
- Rite Aid added that it will continue evaluating its footprint over the next several months months and expects the closure count to increase as it finalizes its plans.
Dive Insight:
Rite Aid has struggled for years now to get its financial affairs in order as it competes against its larger drugstore rivals. It hasn't posted positive net income from continuing operations since the fiscal year covering 2016. During the pandemic, when drugstores became a convenient shopping venue and critical health service providers, those losses shrunk, but still remained above $100 million.
This year, however, losses are surging again. In the third quarter, the company's net income fell from $4.3 million last year to a nearly $36.1 million loss this year. For the first nine months of its fiscal year, losses have more than doubled compared to last year.
Given that, it's no surprise Rite Aid is shrinking its footprint, which currently stands at more than 2,400 retail pharmacies. Yet the company raised its expectations for the fiscal year and said that adjusted EBIDTA rose 12.7% from last year.
A little over a year ago, the drugstore retailer launched a rebranding effort that included a new logo, a focus on holistic health and a retooled website. The company also announced a pilot concept for a "Store of the Future." In September, executives said they were still testing store remodels and new concepts.
Smaller pharmacy chains have had a rough go of it in recent years. Fred's and Shopko both liquidated in bankruptcy within the past three years, while Rite Aid has struggled to stem its losses.
While much stronger financially, Rite Aid peer CVS also plans to close a significant chunk of its store base — 900 over three years, to be exact. The drugstore giant said it was "evaluating changes in population, consumer buying patterns and future health needs to ensure it has the right kinds of stores in the right locations." GlobalData's Neil Saunders describe the coming closures as a "savage and wholesale trimming" and said the move "underlines how far the rot has set in because retail has been a neglected part of the business."
