Pharmacy chain Rite Aid has emerged from Chapter 11 with what it described as a "rightsized store footprint" of about 1,300 stores, down from the 2,100 it had nearly a year ago when it filed for bankruptcy protection as part of a shakeout for U.S. drugstores.
The Philadelphia-based retailer on Tuesday said it had completed its restructuring process and was now a stronger company with a "focused portfolio," a "more efficient operating model," and "significantly less debt and additional financial resources."
Rite Aid, facing significant debt and plagued by litigation related to filling prescriptions for opioids, filed for Chapter 11 in October last year. Through the bankruptcy process, the company said it has eliminated about $2 billion of total debt. It has also received roughly $2.5 billion in exit financing to support the business going forward.
Drugstore chains have been struggling, with not only Rite Aid but also Walgreens Boots Alliance and CVS Health closing hundreds of stores. In fact, in June Walgreens said it was reviewing whether to close about 2,150 underperforming U.S. pharmacies. Drugstore operators are troubled by shifting consumer habits, lower reimbursement rates, and heightened competition from rivals such as Amazon and Walmart.
This comes amid an overall retail landscape in 2024 where there's been a flurry of store operators seeking bankruptcy protection, with some liquidating and shutting all their locations. The most recent casualty is LL Flooring, which is closing over 400 stores. Retailers are blaming a slowing in consumer spending and aftershocks from the COVID-19 pandemic for their woes.
In its Chapter 11 filing last year, Rite Aid said it had more than 2,100 retail pharmacy locations across 17 states. It's been shuttering stores during the past year.
Private company
"We are moving forward with significantly less debt, a rightsized and more profitable store base of approximately 1,300 stores, and a more efficient operating model to better serve our customers and communities," a Rite Aid spokeswoman said in an email to CoStar News.
In connection with the Chapter 11 emergence, Rite Aid will operate as a private company. Its ownership will be transitioned to some of its creditors. All of Rite Aid’s existing common shares were canceled as part of the reorganization plan.
“Emergence is a pivotal moment in Rite Aid’s history, enabling it to move forward as a significantly transformed, stronger and more efficient company,” Jeffrey Stein, CEO and chief restructuring officer, said in a statement.
Separately, Rite Aid announced that Matt Schroeder, who most recently served as chief financial officer, had been appointed CEO. He succeeds Stein, who joined Rite Aid as CEO and chief restructuring officer to lead the court-supervised Chapter 11 process.
Schroeder joined Rite Aid in 2000 as vice president of financial accounting. He has held roles of increasing responsibility since then, most recently serving as executive vice president and chief financial officer since March 2019. Before joining Rite Aid, Schroeder worked at Arthur Andersen as an audit manager.
For the record
Kirkland & Ellis served as Rite Aid’s legal adviser, Guggenheim Securities as investment banker, and Alvarez & Marsal as transformation officer and financial adviser.