Is Rite Aid already headed for a turnaround?
Long a laggard in the retail pharmacy game, Rite Aid recently brought on a new CEO who believes she’s got the right medicine to cure its woes. Only four months into her tenure, things appear to be looking up.
In Rite Aid’s third-quarter earnings report on December 19, CEO Heywood Donigan announced numerous indicators of progress, including the chain’s biggest earnings increase in two years, increased year-over-year flu vaccinations and other immunizations, an increase in front-end comps (when excluding tobacco products), and better expense management and improved retiring of debt.
A nearly 6 percent gain in revenues was seen at EnvisionRxOptions, a pharmacy benefits management (PBM) system the retailer acquired in 2015 that Rite Aid counts on as a growth vehicle. Many larger PBMs are now owned by insurance companies, but EnvisionRxOptions is remaining independent.
Further details on Rite Aid’s turnaround strategy from its new leadership team will be provided at its Analysts Day on March 16.
“We are challenging convention every day,” said Ms. Donigan on a conference call with analysts. “We’re approaching our work and overcoming obstacles with ingenuity and agility to drive results. And I’m really pleased with the progress we’ve made in such short order.”
Ms. Donigan formerly led Sapphire Digital, which designs and develops omnichannel platforms that help consumers choose health care providers. In October, Jim Peters, who formerly led Skyward Health, a strategic healthcare advisory firm, and was formerly a top executive at Geisinger Health System, was named COO.
Rite Aid had spent more than a couple of years pursuing potential mergers or acquisitions to get back on its feet in some form. In 2017, a deal with Walgreens Boots Alliance was called off over FTC concerns. In 2018, Rite Aid was finally able to transfer 1,651 stores to Walgreens, with plans to transfer over 1,932 and three distribution centers.
With the remainder of the stores it owned, Rite Aid was then considering a merger with regional grocer Albertsons as a path to renewed relevance, but the plan petered out by the end of that year.
- Rite Aid Completes Transfer of Stores to Walgreens Boots Alliance and Terminates Tax Benefits Preservation Plan – Rite Aid Corporation/Business Wire
- Q3 2020 Rite Aid Corp Earnings Call – Riteaid.com
- Rite Aid CEO: Turnaround ‘Will Take Some Time’ – Forbes
- Rite Aid and Albertsons call off merger, what’s next? – RetailWire
- Did Walgreens and Rite Aid just work out a better deal for their businesses? – RetailWire
- Rite Aid Says 1,651 Stores Transferred To Walgreens – Forbes
DISCUSSION QUESTIONS: How should the renewed Rite Aid reposition itself? Other than via its enhanced PBM services, and how might Rite Aid otherwise distinguish itself from incumbents like CVS and Walgreens and disruptors like Amazon?