Rite Aid reportedly plans to close hundreds of stores as it mulls how to get ahead of billions of dollars in debt and a slew of opioid-related lawsuits.
The pharmacy retail giant is looking at shuttering about 400 to 500 of its more than 2,100 stores in a bankruptcy process, The Wall Street Journal reported. Bondholders reportedly want to close even more stores.
Rite Aid has proposed either selling the stores or handing them over to creditors, the Journal reported, citing people familiar with the company’s bankruptcy negotiations.
The company is dealing with more than $3.3 billion in debt and more than a thousand federal lawsuits accusing Rite Aid of knowingly filling illegal opioid prescriptions.
One of those lawsuits is from the Justice Department, which alleges Rite Aid filled hundreds of thousands of illegal prescriptions, including those with “obvious red flags,” and intentionally deleted internal notes about suspicious prescribers.
“These practices opened the floodgates for millions of opioid pills and other controlled substances to flow illegally out of Rite Aid’s stores,” Associate Attorney General Vanita Gupta said in March when the suit was filed.
Rite Aid has denied the allegations.
“Given the conversations remain ongoing, no decisions have been made at this time and we are focused on reaching an agreement with our financial stakeholders that will make Rite Aid stronger,” a Rite Aid spokesperson said, Forbes reported.
Rite Aid has been plagued by stores failing to generate profits in recent years and has struggled to compete with bigger chains like CVS, Walgreens, and Walmart’s pharmacies.
Last year, Rite Aid said it would close 145 “unprofitable stores” as part of a plan to “significantly reduce costs.”
CVS and Walgreens, which operate around 9,000 stores each, do not have the same slate of problems as Rite Aid, but both pharmacy chains are also working on closing locations.
CVS said in 2021 that it would close 900 stores by 2024. The closures were set to start in the spring of last year at a rate of about 300 per year.
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Walgreens said in June that it plans to close 150 locations across the country and even more abroad to cut costs.
Rising retail theft is another factor for pharmacies. Theft cost the retail sector $112.1 billion last year, 19% higher than in 2021, according to a National Retail Federation report.
Shoplifting has become rampant in some cities like Los Angeles, San Francisco, and New York, and pharmacies have been a common target since the riots of 2020.
Some drug stores resorted to putting products in transparent locked cases. However, this tactic often results in a sales drop of 15% to 25%, according to the head of a company that sold security devices to Walgreens.
The security devices are an inconvenience since they require customers to flag down an employee and rely on them to unlock the product. They also indicate to customers that the store might not be safe.
Other factors are disrupting the chain pharmacy business model as well, including a rise in independent pharmacies, pharmacies in grocery stores, and online prescription filling.