On October 15th, Rite Aid announced the writing on the wall was too bright to ignore any longer, and they had no choice but to declare bankruptcy. Struggling to survive the billions owed in lawsuits for their role in creating the opioid crisis, their CEO Elizabeth Burr was out of her chair but would remain on the board. In her place, Jeffrey Stein will be the new chief executive, as well as the chief restructuring officer.
To investors and anyone watching the news, this announcement isn’t unexpected. While many didn’t expect this to take so long, it was a relief to many. Back in August, the Wall Street Journal reported that they were $3.3 billion in debt, with hundreds of lawsuit claimants. By declaring bankruptcy, they are provided a stay from potential litigation.
With the NY Stock Exchange giving them six months to get within compliance earlier in October, they are already on thin ice and risk becoming delisted. This means that they have a very short amount of time to get back to their minimum pricing and valuation standards, something that is not all that easy to do. As it is, the stock has already sunk 80% in 2023 alone.
According to their announcement, a small lifeboat of hope has been provided to them. Lenders will be floating the $3.45 billion in financing to continue operating as they navigate the process for Chapter 11 bankruptcy.
In a statement, new CEO Stein said, “With the support of our lenders, we look forward to strengthening our financial foundation, advancing our transformation initiatives, and accelerating the execution of our turnaround strategy. In doing so, we will be even better able to deliver the healthcare products and services our customers and their families rely on — now and into the future.”
Putting it that way, he has made it clear that he doesn’t believe he is at the wheel of a sinking ship. Rather, he is under the assumption that not only can the brand survive this bankruptcy, but they will flourish after surviving it. One smart step they have taken was the closure of 200 stores over the last few years as the opioid lawsuits rolled in. Currently, they have around 2,100 stores open and employ roughly 47,000 people.
Finding a part of making the transition easier, Rite Aid is striving to keep as many locations open as possible. Yet, with so much of their market share coming from rural communities, it may be too little too late. In these communities, the opioid crisis hit the hardest, and yet they are still their cornerstone customer base.
Along the Appalachian Mountains, these pills were everywhere. Known often as “Hillbilly Heroin,” Rite Aid was one of the main suppliers for some of the biggest prescription drug outfits across the US. Despite claims of being in the dark about the situation, their records showed that they knew full well how much they were giving opioids to people. Plus how often they were filling a script, as well as identifying doctors to keep people well supplied, and they chose to ignore it.
Now paying off the debt for their transgressions, one of the only profitable parts of the company, Elixer Solutions, has been sold off to pharmacy benefit-solutions company MedImpact Healthcare Systems Inc. The terms or price of the transaction were not disclosed, but it likely won’t even make a dent in their debt or operating costs.
In Hollywood and on Broadway, the story of rising to prominence selling drugs is a tale damn near as old as time itself. To fail at this is nearly impossible. It would be like failing at selling signs to protestors or ice water in the desert. Yet these clowns were able to mess it up by disregarding their own rules for issuing scripts, doctor hunting, and even recommending clinics they knew were risky. Failing because you killed your customer chain by abusing them is an utter failure in leadership. Now to see if they can atone for their failures.