Rite Aid Looks for Better Results
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."
- Rite Aid earnings beat forecast, drive share price up – Bloomberg News/Pittsburgh
Tribune-Review - Rite Aid’s new CEO takes over and hears an earful at shareholder meeting in
Harrisburg – The Patriot-News - Ken Martindale Promoted To Chief Operating Officer At Rite Aid – Rite
Aid Corporation - Rite
Aid Reports First Quarter 2011 Results – Rite Aid Corporation
Rite Aid has a shot, even a good shot. There are 4800 stores in over 30 states. The wellness + customer rewards program is much needed, up to industry standards and now in place. They now have a good top management team, several of which have worked together at Pathmark. I do remember that they were part of a team at Pathmark that most certainly created an can-do esprit de corps at that chain, noticeably different from what had been the case previously. Already in place is an experienced operations and merchandising team. All this is a plus.
Rite Aid’s advantage is that it has loads of stores, but its disadvantage is that those stores are tired and lack a compelling presence. Perhaps fresh leadership will infuse the company with a new sense of purpose and urgency….
Aside from the fact that they carry Better-Made Potato Chips (Yummm!!), I don’t have a reason to go there.
In the battle of who has the better corner, Walgreens wins every time in our region. In fact, they are even willing in some cases to abandon one corner to get the better one.
Their stores are clean, bright, well merchandised, and have ads that seem to attract not only the typical customer but also the alternative shopper. It’s rare that you can leave without at least one item that you didn’t plan on when you visit Walgreens. In the case of Rite Aid, it’s hard to shop there for even the one item that I can’t get elsewhere. In the case of Walgreens, it’s always a pleasure when Mrs. Scanner says, “honey would you please ….”
Aside for my occasional craving for great chips, there simply isn’t a reason for Rite Aid. (I beg forgiveness for this from the Food Police) Dim, dirty, poor service, poorly merchandised stores aren’t a reason.
So, I continue to look for that retailer that’s willing to take on Better-Made Chips to eliminate my one dismal shopping stop. Please, please, sell my chips elsewhere!
Why is it taking so long for some firm to jump in and take over Rite Aid? They are prime and working diligently to be able to show a better picture to potential suitors. It almost appears those potential takeover firms are on the prowl waiting for something else negative to happen.
The big asset they have is the many locations in densely populated blue collar neighborhoods.
Rite Aid acquired the Read’s chain several years back. They might have been better served to use the Read’s business model. Possibly they would look better on paper now. But that is hind sight. Always 20/20.
Rite Aid has positioned themselves in a going forward determined direction, with new initiatives and a solid new management team. Experience, new strategies and fresh NEW leadership will infuse Rite Aid into a new sense of purpose and urgency, enabling them to be able to pull ahead of their competition. A no-nonsense positive, aggressive CAN DO approach will enhance their efforts going forward.
With 4,800 stores in over 30 states, their wellness + customer rewards program is much needed, and up to industry standards which are now in place, positioning Rite Aid to compete with Walgreens and CVS. Noticeably different from past Rite Aid management teams, this newly gathered collective group now already in place is experienced in operations, merchandising, and logistics; all this is a plus.
Immunization training will more than triple the number of Rite Aid pharmacists able to provide vaccinations and introduce the first products and revamping their private brand program into the stores. The expectations are much higher now, then in past attempts follow through in there sales initiatives. I see Rite Aid committing themselves to their new strategies and will, in time, prove very successful, gaining them recognition and their rightful place in the retail drug marketplace.
It’s hard to conceive of Rite Aid getting this turned around, despite their market penetration. As noted above, their stores are tired looking, and their in-store execution is sorely lacking. The competition is intense, and whether they turn and see a Walmart, Walgreens or CVS over their shoulder, they are looking at a better operator with a more compelling retail presentation.
They have designed and are continuing to improve their loyalty program. The gentleman who designed it (and recently retired) did a great job with the program. It will help a great deal.
The broad roll-out of the wellness+ program is the key element to watch.
Rite Aid has a great retail footprint, but if they fail to enroll the help of their brands in getting shoppers to buy more each trip and shop more frequently, then they will be squandering a huge opportunity. Brands have the resources (both financial and human) and the drive to contribute dramatically to Rite Aid’s success, as long as Rite Aid provides the brands with a compelling vehicle for doing so. The wellness+ program could give Rite Aid a valuable carrot to dangle in front of brands: access to detailed shopper insights and targeted shopper marketing.
Rite Aid’s challenge will be in providing a compelling package of insights, access, and marketing execution without creating a huge burden internally. Traditionally, retailers have opted to build this capability themselves (as with CVS’s ExtraCare system), or buy the expertise (as Kroger did with dunnhumby), each of which can cost many millions of dollars and take years.
I think Rite Aid would be better served by finding a technology platform that can enable this capability without breaking the bank.