Last month, ConsumerAffairs reported on Rite Aid’s decision to potentially start closing hundreds of its stores.
Now, just a few weeks later, the company has filed for Chapter 11 bankruptcy, and it’s likely many stores will be closing their doors. The bankruptcy process will help Rite Aid reduce its debt, while still remaining open for customers, filling prescriptions, and maintaining an online website and mobile app.
Issues with lawsuits, falling sales
What prompted the bankruptcy filing? There were a number of factors that influenced the final decision.
Rite Aid’s financial troubles have been going on for years. The company has been trying to find ways to cut its expenses and make headway on its debt since before the COVID-19 pandemic. Sales have consistently slowed down over the years, which has increased yearly losses and debt.
As of June, Rite Aid’s revenue was at $5.7 billion – a figure that was at $6 billion during the same time last year. Its debt was listed at $3.3 billion, which was up $2.9 billion from March of this year.
“It was always a matter of when, not if, Rite Aid would file for bankruptcy,” Neil Saunders, managing director of GlobalData, said in a note to investors. “The company has been deep in the red for the past six years.”
On top of that, Rite Aid has been involved in a federal lawsuit filed in March of this year, claiming that the company has been responsible for knowingly filing hundreds of thousands of illegal prescriptions for opioids.
While Rite Aid maintains the claims are false, the legal proceedings have added to the company’s mounting debt in recent years.
Closing more stores
Over the last few years, Rite Aid has closed several hundred underperforming stores across the United States. Currently, the pharmacy chain has over 2,100 stores across 17 states, employing over 6,100 pharmacists. Rite Aid is likely to end up closing hundreds more struggling stores, analysts say.
The company has also secured $3.45 billion in financing from its lenders to continue operations throughout the bankruptcy process. Rite Aid has plans to transfer prescriptions to other locations or neighboring pharmacies when necessary to ensure consumers don’t feel the effects of this transition.
Rite Aid has also welcomed a new CEO, Jeffrey S. Stein, who will help transition the company through the bankruptcy proceedings.