When Rite Aid acquired nearly 1,900 Brooks and Eckerd drugstores last June, it became the largest chain on the East Coast. At the time of the acquisition, the company made clear that its newly obtained size would put it in a better position to compete with the likes of Walgreens and CVS on the national drugstore stage.
Since then, however, Rite Aid has struggled. The chain reported a 0.5 percent decrease in same-store sales during December with flat pharmacy numbers (blamed on an increase in sales of lower-priced generics) and lower front-end revenues (-1.2 percent).
The day following the release of its December financials, Rite Aid announced it was closing its 28 stores in the Las Vegas market and selling patient prescription files for 27 stores to Walgreens. While Walgreens is purchasing the patient records, it is not clear what will happen to the actual stores. Rite Aid said it was "working with interested parties on selling or assigning the leases on the 28 buildings."
Rite Aid said the sale was made because Las Vegas was not a core market for the company. According to a company press release, Rite Aid last opened a new store in Las Vegas in 1999.
The erstwhile competitors said they would work together to assure consumers would not be inconvenienced.
"Walgreens pharmacy staffs are ready to make the transition as seamless as possible for Rite Aid patients," said Dave Gloudemans, Walgreens vice president of store operations for Nevada, in a press release. "With 53 Las Vegas stores opened since we entered the market in 1996, patients will find our pharmacies convenient to use. We're excited to bring more patients our unique combination of pharmacy services that includes 24-hour pharmacies at 20 locations in the state, drive-thru pharmacies and prescription labels available in 14 different languages."
Discussion Question: What does this deal mean for Rite Aid and Walgreens? Does the closing of its stores in Las Vegas, for example, suggest that Rite Aid is going into retrenchment mode?