My take: Rite Aid’s troubles

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A now=shuttered Rite Aid location was shuttered despite having a drive-up lane.
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The woman checking out at the Rite Aid counter in the Gaslamp District of San Diego was worried.

“Are you closing,” she asked the clerk as I stood in line with a tube of sunscreen.

The store was not on the list, according to the clerk – at least for now. But word of store closings and a bankruptcy filing had been making the rounds, Public disclosures from the recent Chapter 11 filing of Rite Aid confirmed that the sunny location escaped the chopping block.

The Chapter 11 press release featured an upbeat tone on reducing store counts and cutting the debt load. While retailers can successfully emerge from Chapter 11, many end up in the graveyard of fallen chains.

In our area, two locations in Delaware and one in neighboring Cecil County, MD. are on the list.

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Rite Aid, founded in Pennsylvania, was once the nation’s largest pharmacy chain. The company has struggled for decades, thanks to haphazard expansion efforts, a heavy debt load, management turmoil, and an accounting scandal that filed to a CEO doing time.

For some reason, it resisted efforts to file for Chapter 11, even though its finances have been weak for decades.

Attempts to sell the company to the owner of Acme and Safeway markets and a smaller southern drug chain fell through with Walgreens snapping up a large chunk of its stores.

Cash flow and a heavy debt load limited badly needed store upgrades. Stores getting makeovers are pleasant places without the clutter you see at some competitors. Still, the company was slow to pare down its locations until recently. A wave of organized retail thefts was yet another headwind.

In our Route 40 neighborhood, four locations were within a short drive. That number is down to three, with a recent closing before the Chapter 11 filing.

Rite Aid is not alone in its struggles.

Much larger CVS and Walgreens are also closing stores, partly due to online and big-box competition.

Alan Levin, the former Happy Harry’s chain owner, says drugstore chains are now battling online retailers and prescription providers. Items bought via computer or smartphone are especially attractive to younger people, according to Levin, who sold Happy Harry’s to Walgreens over a decade ago.

Levin said that Rite Aid is more vulnerable than bigger competitors because it has not diversified its revenue stream beyond that of a traditional pharmacy.

Another issue is creating pharmacy deserts in lower-income areas. So far, Delaware has seen few such closings, although the decision to close the Rite Aid in the Brookside neighborhood south of Newark is a reason for concern, even though a CVS is nearby.

One ray of hope may be independent pharmacies that have grown in number and sometimes operate in underserved neighborhoods. – Doug Rainey, chief content officer.

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