Rite Aid, which filed for bankruptcy twice in two years, will potentially close dozens of additional locations.
The pharmacy chain, which shuttered hundreds of its locations during its first bankruptcy proceeding, is now expected to close 47 stores due to a variety of factors, including financial underperformance and lack of interest from potential buyers. The company has already sold or closed 29 retail locations and entered into agreements to sell the prescription files of 63 additional stores.
It is an about-face from 2023, when the company operated thousands of locations around the U.S. Since then, the debt-laden company has significantly reduced the size of its footprint as part of its turnaround strategy.
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Rivals CVS and Walgreens have also initiated closures in recent years as the industry rightsizes itself. According to George Hill, managing director and senior equity research analyst at Deutsche Bank, the industry watched the continued growth and capacity building in the pharmacy space, which Hill said "didn't necessarily make a ton of sense."
Hill said that the "industry seemed to be growing footprints and locations kind of faster than the need for pharmacies was growing."
Sarah Foss, head of legal at Debtwire, told FOX Business that while there is a "limited market for Rite Aid’s valuable pharmacy assets as they may generally only be sold to a licensed and registered pharmacy, the company has said that it has had significant interest from potential buyers."
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This is key, according to Foss, who noted that a "long, drawn-out sale process could be the death knell for Rite Aid as the value of the company’s assets can deteriorate quickly."
This could especially happen if pharmacy customers choose to go elsewhere during this process, Foss added.
Foss said the sale process itself is to happen at lightning speed with an auction set for no later than May 14 for the pharmacy assets and June 20 for the rest of Rite Aid’s assets. The bankruptcy court approval of the sales is expected to come approximately a week later.
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"A court-approved auction and sale process inside of the protections of bankruptcy can offer several advantages from both a buyer and seller’s perspective in this type of situation, allowing for an expedited sale transaction in which buyers can purchase assets free and clear of liens, claims and encumbrances in a transparent process," Foss added.
Rite Aid marks the 14th company to file for Chapter 11 for a second time since the beginning of 2024 and is the fifth one in 2025.
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