It also announced the appointment of Jeffrey S. Stein as CEO, chief restructuring officer and a member of the company’s board of directors.
In response to the filing, analyst Neil Saunders, managing director of GlobalData, said in an email that bankruptcy was the “only sensible option” for Rite Aid and that it “simply isn’t a viable entity” financially.
The Chapter 11 filing, also known as a reorganization, allows a company to stay in business while restructuring its debts through a court-controlled process. Rite Aid had about $3.3 billion in long-term debt as of June, when it reported first-quarter financial results.
It is also a defendant in several lawsuits concerning its role filling opioid prescriptions. In 2017, more than 1,000 opioid-related cases were consolidated in the U.S. District Court for the Northern District of Ohio. In March 2013, the Justice Department brought its own complaint, alleging violations of the False Claims Act and the Controlled Substances Act.
Rite Aid’s problems aren’t limited to opioid litigation. Like many retailers, it has been has been hit hard by shrink — the depletion of inventory caused by something other than sales. Chief financial officer Matthew C. Schroeder told investors in the company’s second-quarter earnings call that losses were about $9 million higher than last year. He added that the company closed stores in “high-shrink areas.”
Rite Aid shuttered 145 stores last year and another 25 in its second quarter, according to its latest earnings call. Schroeder told investors that the company assesses store performance “on an ongoing basis” and considers lease agreements. He added that the company expects to close more stores in the second half of the year but did not provide a specific number.
“It’s certainly something we’re going to continue to look at as we think about just how do we drive as much profitability as we can while still maintaining the presence in communities and providing access to our customers and communities,” Schroeder said.
Bankruptcy could mean more shop closures, Saunders predicted, running the risk of pharmacy deserts in some areas.
Rite Aid joins a handful of other retailers that filed for Chapter 11 bankruptcy this year, including David’s Bridal, Christmas Tree Shops, Tuesday Morning and Party City. One of the most high-profile chains to go under this year was Bed Bath & Beyond, which in April announced plans to lay off staff and shutter 360 stores, as well as 120 Buy Buy Baby locations.
