Friday, June 27, 2008

Rite-Aid: From Worse to Awful

Speaking of a pharmacy industry shakeout, perpetual also-ran Rite-Aid (RAD) reported another quarter of weak results. See Acquired Stores Weigh on Rite Aid from today’s Wall Street Journal.

Last February, Rite-Aid’s stock had the dubious honor of being named the Worst 10-Year Performer when the stock was still a comparatively lofty $2.79 per share. Industry analyst Larry Abrams calculated at the time that Rite-Aid was worth more closed than as an ongoing concern. (See Rite Aid: Worth More Closed Than Open.)

Rite-Aid’s stock closed at $1.35 yesterday. A Goldman Sachs analyst is quoted in today’s paper as saying “it is hard to find compelling long-term value even at the $2 level.” Ouch.

FYI, McKesson (MCK), Rite-Aid’s primary wholesaler, generated about 15% of its U.S. distribution revenues from Rite-Aid. Their contract runs until April 2010. I presume that McKesson is keeping a tight hand on A/R here.

When Rite-Aid Brooks/Eckerd came together in August 2006, I wrote: “Rite-Aid, Brooks, and Eckerd are notorious underperformers in retail pharmacy. Yes, things have improved, but none of the companies are as well run as CVS or Walgreens. As one industry executive quipped to me this morning: ‘If you tie two rocks together, they still won’t float.’ Nonetheless, the deal makes sense given the marketplace dynamics.”

Thought for the day: In theory, theory and practice are the same. In practice, they are different.


  1. AnonymousJune 27, 2008

    Rite Aid will only get worse for so many reasons. Lawsuits in NYS for selling expired medications to the public. Major Medicaid cuts coming in July in NYS, and to be followed in other States where they have stores. Morale in the stores are low, and the stores themselves are looking shabbier and shabbier. No pharmacists wants to work for them, and those who do are miserable. This is a company that will be sold off soon.

  2. indeed, morale is low- seasonal merchandise and planning is horrible- pharmacists are thought of as gods while everyone else in the store is whipped into submission with nary a free thought- corporate, and those who run it, have not done much to take care of its employees and if you don't do that, how do you expect them to take care of the customer?

  3. To the anonymous writer who states we sell expired drugs,, think again, we have had an outdate program in progress for several years,you are wrong, and as for shabby stores, open your eyes, they are clean and organized, more so than CVS and Walgreens, and our pharmacists are happy,,, they get paid alot and if not they would have left by now, why are you so critical????

  4. morale in stores is at an all time low. front end managers are working more hours than they are salaried for. Associates no longer want to be promoted, because you have no advantage, you work the worst hours for just a litte more pay. stores are being shipped too much merchandise and no where to display it. Inventory results are coming back poor. Happy Associates make for better workers. Pharmacy customers are growing more and more unhappy with longer wait times. Sales are down.