DISCUSSION

Rite Aid Looks for Better Results

June 25, 2010Written by George Anderson

In October 2008, John Ransom, an analyst with Raymond James, lamented the state of the stock market in an interview with The Associated Press. "All stocks have gotten destroyed lately, especially any company with a shaky balance sheet. Rite Aid has the worst balance sheet of any company I follow."

Fortunately for Rite Aid, the company's shares -- which closed at 52 cents on Oct. 7, 2008 -- have since climbed back over the dollar mark. The drugstore chain even got a boost this week when it reported a loss narrower than many had been predicting for the chain.

John Standley, the former chief operating officer of Rite Aid who took over as president and CEO of the company this week at the annual shareholders' meeting, said in a recent press release, "During the quarter, we made excellent progress on our initiatives. We nationally launched our new wellness + customer loyalty program, began immunization training that will more than triple the number of Rite Aid pharmacists able to provide vaccinations and introduced the first products in our revamped private brand program into the stores. We expect these sales initiatives, along with the continued roll-out of our segmentation strategy, to have a significant positive impact on our business long term."

Even with the "good news" surrounding the chain, Mr. Standley finds himself facing significant challenges as he replaces Mary Sammons, who will stay on as chairman of the company for the next two years. Ken Martindale, formerly senior executive vice president of merchandising, marketing and logistics, is taking over Mr. Standley's former position as chief operating officer for Rite Aid.

According to a report by The Patriot-News, union employees from California and Pennsylvania gathered outside the chain's annual shareholders' meeting this week to protest Rite Aid's treatment of workers. Shareholders gave executives an earful over the company's performance in recent years.

Discussion Questions: Is Rite Aid on the right track? What will the chain need to do to achieve success against the likes of Walgreens and CVS?
[Editor's Notes] The company's stock has been boosted by repeated rumors that it is a takeover target. Neil Currie, equity analyst at UBS Securities, told Bloomberg News, "Rite Aid is an interesting strategic asset in a consolidating industry. It has important market share in important markets throughout the U.S."

Discussion Thread0