Updated Oct 16, 2023 - Economy

Rite Aid files for bankruptcy, will close underperforming stores

Exterior of Rite Aid store

Rite Aid filed for bankruptcy protection Oct. 15, 2023. Photo: Angus Mordant/Bloomberg via Getty Images

Rite Aid filed for Chapter 11 bankruptcy protection Sunday and said it plans to close "underperforming stores."

Why it matters: The Philadelphia-based drugstore chain's bankruptcy filing comes as it faces federal, state and other lawsuits tied to allegedly filling unlawful prescriptions for controlled substances, including opioids.

Driving the news: Rite Aid said in a statement that it filed for bankruptcy protection in New Jersey and reached an "agreement in principle with key creditors on the terms of financial restructuring plan."

  • The company said it has received a "commitment for $3.45 billion in new financing to support business operations."

Meanwhile, the company announced Jefferey Stein as the new CEO and chief restructuring officer.

Context: In March, the U.S. Department of Justice filed a lawsuit against Rite Aid accusing the pharmacy chain of knowingly filling unlawful prescriptions for controlled substances.

  • DOJ alleged in the complaint that from May 2014 to June 2019 Rite Aid filled hundreds of thousands of prescriptions "that were medically unnecessary, lacked a medically accepted indication, or were not issued in the usual course of professional practice."
  • Last November, Walmart, CVS Health and Walgreens announced multi-billion agreements to settle lawsuits over how its pharmacies handled prescriptions for addictive opioid painkillers.

By the numbers: The chain operates more than 2,100 retail pharmacy stores across 17 states.

Between the lines: The bankruptcy filing doesn't come as a surprise, said Neil Saunders, managing director of GlobalData.

  • "It was always a matter of when, not if, Rite Aid would file for bankruptcy," Saunders said. "The company has been deep in the red for the past six years, notching up combined net losses of $2.9 billion."
  • Rite Aid has struggled in recent years to keep up with its much-larger drugstore competitors, Axios' Nathan Bomey wrote.

Rite Aid closing stores

Details: As part of the bankruptcy filing, Rite Aid said it will "accelerate the company's store footprint optimization plan."

  • The company said it "will continue assessing its footprint and close additional underperforming stores."
  • "The court-supervised process provides Rite Aid with legal tools to accelerate our footprint optimization in an efficient and orderly manner," Stein said in the news release.

Yes, but: The news release didn't say how many stores could close in bankruptcy.

  • The Wall Street Journal reports that the retailer has closed more than 200 stores over the past two years and rejected 168 leases in connection with the bankruptcy filing.

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Editor's note: This article has been updated with new details throughout.

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