Source: Rite Aid
Rite Aid puts out ‘help wanted’ sign for a new CEO
Rite Aid yesterday said that board member Elizabeth “Busy” Burr has been named interim CEO of the company, effective immediately. She replaces Heyward Donigan who has led the drugstore chain since 2019.
Ms. Burr’s resume includes executive positions at health-related companies, financial services and retail, including Carrot, Inc., Humana, Citigroup, eBay, Credit Suisse and Gap.
Rite Aid’s chair Bruce Bodaken said that “the board was unanimous in its belief that Busy is highly qualified to serve as interim CEO” as the company conducts a search for someone to fill the job on a permanent basis.
Ms. Burr, who joined Rite Aid’s board in 2019, said that she would work with the company’s board and executive team to support pharmacists and other team members in meeting the needs of customers. She didn’t indicate any plans to change Rite Aid’s strategic direction in her public statement.
Rite Aid, which has struggled for years against its larger rivals CVS and Walgreens, did show some signs of promise in 2020 as the chain’s financial performance received a boost from COVID-19 testing and vaccinations.
The drug retailer’s revenues and profits, however, took a hit over the past year. The Wall Street Journal reports that Rite Aid’s stock price fell last month to a 48-year low.
Rite Aid yesterday reaffirmed its guidance for the current fiscal year. It expects to post a net loss of $584 million to $551 million on total revenues of between $23.7 billion and $24.0 billion. The company expects to continue posting a positive cash flow.
The retailer recently pointed to small store pilots it is running in Virginia to address “pharmacy deserts” in rural and other underserved areas. The stores, which measure between 2,400 and 3,000 square feet compared to the typical Rite Aid at 11,000 square feet, feature a full-service pharmacy and a retail mix of health and wellness products. A full-time pharmacist and full-time pharmacy technician are supported by additional part-time technicians that will float between the test sites in Craigsville, Greenville and Scottsville.
Rite Aid operates 2,300 pharmacies across 17 states and also owns Elixir, the pharmacy benefits manager and service provider.
- Rite Aid Corporation Names Elizabeth “Busy” Burr Interim Chief Executive Officer – Rite Aid Corporation
- Rite Aid CEO Heyward Donigan Leaves Drugstore Chain – The Wall Street Journal
- Rite Aid looks to become an Rx oasis inside ‘pharmacy deserts’ – RetailWire
- Has Rite Aid found the right prescription for growth? – RetailWire
- Is Rite Aid already headed for a turnaround? – RetailWire
Discussion Questions
DISCUSSION QUESTIONS: What does Rite Aid need to do to better to compete against CVS, Walgreens and other rivals? What type of CEO should the chain be seeking to lead it through its next chapter?
Poll
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The sector is struggling in general but they are definitely the worst of the lot. It looks like they do not invest in their stores and customer experience and it shows in the numbers.
Rite Aid’s recent small format play is a step in the right direction. As Walgreens sets its sites on becoming a healthcare company and CVS grows through partnerships with retailers like Target, leaning into location-based convenience makes sense. Its recent hookups with third-party delivery companies such as GrubHub play well with the strategy and demonstrate that Rite Aid isn’t just throwing darts.
Why would anyone want this position? I thought the Mission Impossible movie was not opening until the summer?
A potential path would be to become “the anti-CVS and -Walgreens” — go where they are not, and serve the customers in a different way. For example: my local Walgreens is cavernous and there is one checkout associate there typically, and they usually are not trained to do much more than checkout.
Hire an executive with deep hospitality experience, if you can find one, and keep your fingers crossed.
Between CVS and Walgreens, the combined store count is nearly 10 times the number of Rite Aid stores. This feels like an insurmountable competitive advantage, especially after Walgreens was able to scoop up a large number of Rite Aid stores in 2017. Both companies have expanded their reach into everything from health insurance to clinics, and CVS has built a partnership with Target.
This leaves Rite Aid in a “no man’s land” situation — without the critical mass to grow the business in a significant way despite new small-format stores and so forth. And antitrust regulators would probably not approve either CVS or Walgreens acquiring the rest of its stores — leaving a new CEO in a bind.
Rite Aid has been in survival mode for many years competing against such large behemoths as CVS, Walgreens, Walmart and Amazon. But the competitive set is more than just the Big Four due to grocers offering services in Rx, health centers and health products. Honestly, the new CEO might want to look at all options, including a merger with a strong and healthy competitor.
Ms. Burr most definitely has a challenge ahead of her in this interim role. Despite positive strides during the pandemic, Rite Aid has been struggling to catch its formidable rivals and unearth a winning formula.
I’m encouraged by the chain’s recent move to fill the unmet needs of pharmacy deserts in some of the more rural areas of the U.S. However that is also where independent pharmacy has been well-established as an integral part of the community, where Walmart and Dollar General, in particular, have created strongholds. So time will tell.
What type of CEO should the chain be seeking? An individual courageous enough to pivot (quickly); a leader who can motivate a team and win favor with the investment community; and a big thinker who can see the future of retail pharmacy’s role in a fast-emerging health ecosystem (yesterday’s model will not work tomorrow).
I hate to say this, but firstly they need to be “on the list” with insurance companies as an “in-network” provider — or the Rx game is over at that point. Perhaps not playing the ridiculous high low/promotion game that is prominent in this business, and having a fairly priced, well managed assortment would be good goals.
I have two CVS stores and one Walgreens store within three miles of my home. I have no idea where a Rite Aid store is nearby. That is a problem that putting locations in pharmacy deserts will not help. My insurance gives preference to Walgreens which does not help Rite Aid either. Those are significant structural challenges for the future. Assuming those issues are addressed, what can Rite Aid do to be distinctive?
Rite Aid stores are not places I want to shop. In a sense, they are the Kmart of pharmacies — in desperate need of a revitalized store. Will they avoid the Kmart curse and find a way to do that? It’s not clear.
Oh. And would they please allow sign designers to change the logo? Their “designed for the web” logo is extraordinarily shippable blown up 20 feet high and put onto a store.
I met with some of their team last year looking for ways to improve. They pleaded they didn’t have any money to work with and expected drastic reductions in pricing. Cut stores and do the hard work.
I keep forgetting the company still exists. I’ve been obsessed with how bad the customer experience is at Walgreens.
As to Rite Aid it’s hard to beat scale in a class of trade where scale is the path to dominance. As to a new Rite Aid CEO, he/she/they need to be an innovative and creative thinker, a bit of a futurist, and be prepared to radically redefine the rules of engagement. After all, when you can’t win playing by the rules, change the rules.
Rite Aid is caught in the middle. Big Box (Target, Walmart etc.) have made moves into pharmacy for the one-stop shop. Walgreens and CVS are going to beat them on what is left for that market share. They need to reinvent themselves.
Wild idea, but no one in the pharmacy space has tried the Trader Joe’s model. Small footprint, 95% store-brand, far fewer SKUs. If they can’t win on selection, I think there is an opportunity for someone to win on limited choice/price. Hard to get an appetite for that amount of change though….
I could say a lot but I’ll leave it at this: based on how they run things the past couple years it feels like they are on a shoestring hanging on. Inventory levels, store hours (“temporarily due to staffing”), and maintenance have been cut past the bare minimum. They are running a store that is far inferior to the average CVS or Walgreens now (both poor retailers) due to these cuts. It is like there is very limited money to work with. That gets even more limited when your sales keep falling.
The store base had a strong remodel program going through about 2018 but that stopped. The store base was looking great during the failed merger attempts with Walgreens and Albertsons. Now it has not been continually refreshed and it is in need of serious attention.
One of the first orders of business for the now past CEO was to waste a ton of money on new logo signs. This company did not have the money for such frivolous activities, they needed to spend what little capital expenditures they had (their debt covenants require a certain amount of capex) on remodels and new stores. I knew that was a bad sign right from.the start.
They have closed a number of stores that I am not sure why they closed as they were newer and well positioned and now sit on their surplus real estate list with leases that don’t expire for 5+ years.
It’s a self-reenforcing cycle: C-suite revolving doors are both a result of poor performance and a cause of it. Rite Aid is, I believe, a distant third in the pharma triumvirate, and honestly I don’t know what they can do to change that that wouldn’t require huge amounts of money. Opening mini-stores in areas that have been shown unable to support normal ones certainly doesn’t seem like the kind of idea that will help, however laudable it may be as a public service.