Rite Aid Seeks Direction as Pressure Mounts
Rite Aid has said it aims to keep cutting expenses through 2024 by ramping up store closures and shrinking its workforce. Photo: Mario Tama/Getty Images By Sabela Ojea April 19, 2023 9:00 am ET Rite Aid Corp.’s cash reserves are dwindling, a lawsuit is looming and sales are slowing ahead of the drugstore chain’s fourth-quarter earnings on Thursday. Meanwhile, investors are waiting for the company to name a permanent chief executive to chart a path to growth as demand wanes for Covid-19 booster shots and testing services. “Covid was a shot in the arm financially, but we now need to understand what the long-term vision is here,” said Elizabeth Anderson, a managing director at Evercore ISI, the research arm of the financial-services firm. Analysts polled b
Rite Aid has said it aims to keep cutting expenses through 2024 by ramping up store closures and shrinking its workforce.
Photo: Mario Tama/Getty Images
By
Rite Aid Corp.’s cash reserves are dwindling, a lawsuit is looming and sales are slowing ahead of the drugstore chain’s fourth-quarter earnings on Thursday.
Meanwhile, investors are waiting for the company to name a permanent chief executive to chart a path to growth as demand wanes for Covid-19 booster shots and testing services.
“Covid was a shot in the arm financially, but we now need to understand what the long-term vision is here,” said Elizabeth Anderson, a managing director at Evercore ISI, the research arm of the financial-services firm.
Analysts polled by FactSet expect the company to report fourth-quarter revenue declined to $5.7 billion from $6 billion a year earlier.
Rite Aid’s largest competitors, Corp. and Inc., both have stronger outlooks as they shift their strategies toward their primary healthcare divisions through multibillion-dollar acquisitions. Rite Aid’s lack of capital limits its merger and acquisition opportunities.
Rite Aid’s most recent cash position stood at slightly over $100 million, while CVS and Walgreens ended their latest quarters with cash on hand of $12.9 billion and $1.1 billion, respectively.
The Philadelphia-based company previously said it aims to keep cutting expenses through 2024 by ramping up store closures and shrinking its workforce. Rite Aid expects lower pharmacy margins to continue into the fourth quarter due to weaker consumer demand for discretionary items, Chief Financial Officer Matthew Schroeder said.
Rite Aid from 2015 to 2018 tried unsuccessfully to merge with Walgreens and later Albertsons Cos., in multibillion-deals the company hoped would improve its capital position and enhance its pharmacy footprint.
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The company for years has warned of not having sufficient cash flow to pay down its debt. Its current net debt stands at $6.1 billion, according to S&P Global Market Intelligence.
Rite Aid faces potential financial penalties arising from allegations by the Justice Department over its alleged role in the U.S. opioid crisis. The department accuses the company of filling thousands of unlawful prescriptions for controlled substances such as fentanyl and oxycodone.
Rite Aid’s stock has fallen more than 65% in the past 12 months and is currently valued at $149 million after the company has reported four consecutive quarters of losses and three consecutive quarters of lower sales.
“Rite Aid’s issue isn’t costs, but how it plans to achieve revenue growth,” Evercore’s Ms. Anderson said.
Write to Sabela Ojea at [email protected]
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