Rite Aid Corp. is working to complete a deal with lenders to exit bankruptcy. But even with a rescue deal in hand, the ailing pharmacy chain is poised to to be significantly smaller.
Since filing Chapter 11 in October, Rite Aid has said it will close more than 520 locations, according to a Bloomberg News analysis of court records. The closures, which could increase, represent nearly a quarter of the 2,111 stores Rite Aid operated when it entered bankruptcy.
The closings are happening as Rite Aid continues to face competition from larger drugstore chains CVS Health Corp. and Walgreens Boots Alliance Inc. and major discount retailers like Walmart Inc. and Target Corp., which offer pharmacies in their stores. Closing stores could help Rite Aid cut costs and boost some of its remaining shops by transferring impacted customers to a single pharmacy within a city or town, said David Silverman, a senior director at Fitch Ratings.
A representative for Rite Aid declined to comment on the store closings.
Rite Aid has already scaled back in several major cities and closed the most stores in California, Pennsylvania and New York, three states where it had the highest number of shops.
The retailer operated stores in 17 states when it filed Chapter 11.
Stores have been closed in cities located on the East and West Coast, including 19 locations in the Bronx, Brooklyn, Queens and Staten Island. The company has also shut at least 20 stores in the Los Angeles area, 20 stores in Philadelphia and nine in Seattle, according to court documents.
Troubled retail chains often close stores in bankruptcy, utilizing tools in Chapter 11 that allow them to exit expensive leases relatively cheaply. Mall retailer Express Inc., which filed bankruptcy in April, has said it intends to close 106 under-performing stores and will consider shutting additional shops in Chapter 11.
Rite Aid was “burdened by unprofitable stores,” the leases of which it could only afford to get out of through Chapter 11, CEO Jeffrey Stein said in October, when the company sought court protection. The retailer also implemented several cost-saving measures prior to bankruptcy, including closing more than 200 under-performing stores, Stein said.
The company is working with key bondholders to save the chain from liquidation. Bondholders have agreed to provide Rite Aid $57 million in exchange for taking business out of Chapter 11, lawyers have said.
Rite Aid, which has faced opioid-related liabilities, has also struck agreements with government authorities and other key creditors representing opioid victims and other tort claimants.
The case is Rite Aid Corp., 23-18993, in the US Bankruptcy Court for the District of New Jersey.