Rite Aid

Rite Aid Corporation

Formerly called	Thrifty D Discount Center (1962–1968)
Type	Public
Traded as	NYSE: RAD
Industry	Retailing
Founded	September 12, 1962 (1962-09-12) Scranton, Pennsylvania, U.S.
Founder	Alex Grass
Headquarters	East Pennsboro Township, Cumberland County, Pennsylvania, United States
Number of locations	4,621 (June 2017) [1]
Key people	John T. Standley, Chairman & CEO; Ken Martindale, President & Chief Operating Officer; Frank Vitrano, Chief Financial Officer & Chief Administrative Officer
Products	Pharmacy
Revenue	US$ 30.736 billion (FY2016)
Operating income	US$ 731.28 million (FY2016)
Net income	US$ 165.47 million (FY2016)
Total assets	US$ 11.277 billion (FY2016)
Total equity	US$ 581.43 million (FY2016)
Number of employees	89,000 (2016)
Website	www.riteaid.com

Rite Aid Corporation is a drugstore chain in the United States and a Fortune 500 company. It is headquartered in East Pennsboro Township, Cumberland County, Pennsylvania, near Camp Hill.^[2][3] Rite Aid is the largest drugstore chain on the East Coast and the third largest in the U.S.

Rite Aid began in 1962 as a single store opened in Scranton, Pennsylvania called Thrift D Discount Center. After several years of growth, Rite Aid adopted its current name and debuted as a public company in 1968. Today, Rite Aid is publicly traded on the New York Stock Exchange under the ticker RAD. Its major competitors are CVS and Walgreens. In late 2015, Walgreens announced that it would acquire Rite Aid for $9.4 billion pending approval. But as of June 29th, 2017, over fear of antitrust regulations, Walgreens Boots Alliance will instead buy half of Rite Aid's stores for $5.18 billion.^[4][5]

History

Alex Grass founded the Rite Aid chain in Scranton, Pennsylvania in September 1962.^[6] The first store was called Thrift D Discount Center, a health and beauty aids store, without a pharmacy. It was an offshoot of Rack Rite Distributors, a subsidiary of his father-in law’s Lehrman & Sons which Alex Grass launched in 1958. The company rented and stocked racks with health and beauty aids in grocery stores. In 1965, Thrift D's 23rd store added a pharmacy and the company name was changed to Rite Aid.^[7] Through acquisitions and new stores, Rite Aid quickly expanded into 5 northeast states by 1965. The chain was officially named Rite Aid Corporation in 1968 and made its debut on the American Stock Exchange. It moved to the New York Stock Exchange in 1970. In 2011, Rite Aid was ranked #100 on Fortune 500 Largest U.S. Corporations.

Growth and acquisitions

Rite Aid in Tawas City, Michigan

Ten years after its first store opened, Rite Aid operated 267 locations in 10 states. 1983 marked a sales milestone of $1 billion. A 420-store acquisition along the east coast expanded Rite Aid's holdings beyond 2,000 locations, as did the acquisition of Gray Drug in 1987. Among the companies acquired was Baltimore, Maryland's Read's Drug Store. On April 10, 1989, Peoples Drug's 114 unit Lane Drug of Ohio was purchased by Rite Aid.^[8]

Rite Aid acquired twenty-four Hook's Drug stores from Revco in 1994, selling nine of those stores to Perry Drug Stores, a Michigan-based pharmacy chain. One year later, in turn, the 224-store Perry chain was acquired by Rite Aid.^[9][10] The 1,000-store West Coast chain Thrifty PayLess was later acquired in 1996. The acquisition of Thrifty PayLess included the Northwest-based Bi-Mart membership discount stores, which was sold off in 1998. Acquisitions of Harco, Inc. and K&B, Inc. brought Rite Aid into the Gulf Coast area.

In the 1990s, Rite Aid partnered with Carl Paladino's Ellicott Development Co. to expand the company's presence in Upstate New York.^[11]

In 2015, Rite Aid purchased EnvisionRx, a pharmacy benefit manager, which owns subsidiary PBMs MedTrak, Connect Health Solutions, and Smith Premier Services.^[12]

Partnership with GNC

General Nutrition Corporation (GNC) and Rite Aid formed a partnership in January 1999, bringing GNC mini-stores within the Rite Aid pharmacies. A partnership with drugstore.com in June 1999 allowed customers of Rite Aid to place medical prescription orders online for same-day, in-store pickup.

Company troubles

Rite Aid in Scott Depot, West Virginia

Rite Aid had a major accounting scandal that led to the departure (and subsequent jail time) of several top ranking executives, including CEO Martin Grass. Former Rite Aid vice chairman Franklin C. Brown is serving a 10-year sentence in a medium-security facility at Federal Correctional Complex, Butner, near Raleigh, North Carolina.^[13] After serving six years in prison, Martin Grass was released on January 18, 2010.^[14] Founder Alex Grass died of cancer on August 27, 2009.^[15]

At the time, Rite Aid had just acquired Thrifty PayLess and was integrating the stores into the company. As a result, Leonard Green, who ran the investment firm that had sold those stores to Rite Aid, took control of the company and installed Mary Sammons from Fred Meyer as CEO.

In July 2001, Rite Aid agreed to improve their pharmacy complaint process by implementing a new program to respond to consumer complaints.^[16]

On July 25, 2004, Rite Aid agreed to pay $7 million to settle allegations that the company had submitted false prescription claims to United States government health insurance programs.^[17]

In August 2007, Rite Aid acquired approximately 1,850 Brooks/Eckerd Stores throughout the United States in hopes of improving their accessibility to a wider range of consumers. On December 21, 2007, The New York Times reported that Rite Aid had record-breaking losses that year, despite the acquisition of the Brooks and Eckerd chains.^[18] The following fiscal quarter saw an increase in revenue but a sharp fall in net income as Rite Aid began the integration process. Rite Aid shares fell over 75% between September 2007 and September 2008, closing at a low of $0.98 on September 11, 2008. Rite Aid shares subsequently dropped to $0.20 on March 6, 2009, the all-time low as of 8 December 2011.^[19]

Scott Cole & Associates, APC filed a class action lawsuit against Rite Aid Corporation on behalf of its salaried California Store Managers. It was alleged that Rite Aid failed to pay overtime to these workers and denied them their meal and rest periods. In 2009, the action settled for $6.9 million. Scott Cole & Associates - Rite Aid Class Action

In June 2010 John Standley was promoted from Chief Operating Officer to Chief Executive Officer, with former CEO Mary Sammons retaining her position as Chairperson;^[20] Ken Martindale, previously co-President of Pathmark, was named Chief Operating Officer.^[21]

Customer loyalty and rewards programs

The Wellness Plus card (officially rendered as wellness+) is Rite Aid's shopping rewards card that started nationwide on April 18, 2010. Membership is free, and benefits include free health and wellness benefits as well as shopping and prescription drug discounts and special prices. Earlier, in March 1984, Rite Aid had introduced Living More, a seniors' loyalty program which offered similar discounts and benefits. This program was very similar to the former Revco program which was called "Senior Shoppers" (Rite Aid had attempted to purchase Revco in 1996). The Living More program was being discontinued as of October 31, 2010, having been essentially superseded by the Wellness Plus card. However, as of 2013, the Wellness+ Plus card allows seniors to upgrade to the Wellness 65+ card, basically reintroducing the previous Living More benefits along with the newly created Wellness card. For example, seniors can receive 20% off on non-sale items every first Wednesday of each month. Rite Aid also offers free prescription delivery in select locations and holds some surveys for their loyal customers to share praise and complaints. Surveys are just like a platform where good and bad estimations are mingled together. Upon the completion of the customer satisfaction survey, customers are invited to try to win the grand prize and monthly prize as a feedback.^[22]

In May 2015, Wellness Plus was integrated into the new American Express-backed Plenti rewards card, which Rite Aid shares with AT&T Mobility, Direct Energy, Enterprise Rent-A-Car, ExxonMobil, Hulu, Macy's, and Nationwide Insurance; Rite Aid was the only one of the group that had an existing loyalty program before the creation of Plenti. The new system requires Wellness Plus cardholders to receive new cards displaying both the Wellness Plus and Plenti logos.^[23]

Merger with Eckerd and Brooks

A map of all Rite Aid stores as of September 2015

On August 23, 2006 the Wall Street Journal announced that Rite Aid would be buying the Eckerd Pharmacy and Brooks Pharmacy chains (Brooks Eckerd Pharmacy) from the Quebec-based Jean Coutu Group for US$3.4 billion, and merging the two chains into one dominant pharmacy system. The company's shareholders overwhelmingly approved the merger on January 18, 2007. After some store closures and the conversion of the two chains was completed, Rite Aid became the dominant drug store retailer in the Eastern U.S., and the third largest drug retailer nationwide (behind the faster-growing Walgreens and CVS chains).

Similar to what CVS experienced in the Chicago metropolitan area after its purchase of Albertsons drug store chains, the deal gave Rite Aid some locations that were too close to each other. (Only 23 store locations nationally were sold off to Walgreens, The Medicine Shoppe, or independent owners to meet federal regulations.) In many situations, especially Pennsylvania, where both chains were dominant and had roots in those states (Rite Aid originated in Scranton, while Eckerd has roots in western Pennsylvania via Erie for itself and Pittsburgh for converted Thrift Drug locations), there were now two Rite Aids as close as right next door to each other. However, in March 2008 some of these overlapping stores were closed, with the locations saying that they "moved" to a new address, when, in fact, they "moved" to the other Rite Aid that was nearby. Most of these stores that closed were pre-existing Rite Aids from before the Eckerd deal, since Eckerd had built newer, more modern locations with drive-thru pharmacies and larger space under ownership of both JCPenney and Jean Coutu Group, and the "moved to" sites were converted Eckerds. Employees at the closed stores were transferred to the nearby locations, so no layoffs were necessary.

Rite Aid had sold some locations to JCPenney's Thrift Drug chain in the mid-1990s shortly before JCPenney's acquisition of Eckerd, and had also sold all of their Massachusetts stores to Brooks in 1995, bringing some existing Eckerd and Brooks stores that were once Rite Aids full circle.

Because Eckerd was previously owned by JCPenney, Eckerd stores accepted JCPenney charge cards. Since the merger, all Rite Aids take JCPenney charge cards, a policy also followed by competitor CVS/pharmacy, which had earlier acquired most of the Eckerd chain in the southeastern United States.

Today, New York with 600 stores is home to the largest number of Rite Aids, followed by California and Pennsylvania with 583 and 540 respectively.^[24]

Market exits

On January 4, 2008, Rite Aid Corporation announced that it would terminate operation of its 28 Rite Aid stores in the Las Vegas, Nevada, area and had signed an agreement to sell patient prescription files from that metro market to Walgreens. The company said Las Vegas was a non-core market that had not been contributing to overall results, and it had not opened a new store there since 1999. One Nevada store would remain open in Gardnerville, close to the border of California, where Rite Aid had more than 600 stores.^[25]

On February 5, 2009, Rite Aid announced that it would terminate operations of 7 Rite Aid stores in San Francisco, California, along with 5 stores in Eastern Idaho through a sale to Walgreens.^[26]

Failed merger with Walgreens

On October 27, 2015, Walgreens announced that it would acquire Rite Aid in a deal valued at $9.4 billion ($9 per share), pending regulatory and shareholder approval. The deal would result in a merger of two of the United States' three largest pharmacy chains.^[27] Walgreens plans to keep the Rite Aid name on existing locations when the deal goes through,^[28] though the long term plans for the Rite Aid name are unknown. On December 21, 2016, it was announced that Fred's would acquire 865 Rite Aid stores as a result of the merger for the price of $950 million for antitrust reasons.^[29] In January 2017, Rite Aid and Walgreens cut the price of the merger to approximately $6.8 billion and delayed the closing date six months.^[30] On January 31, 2017, it was reported that the workers' union 1199SEIU United Healthcare Workers East, representing 6,000 Rite Aid Corp workers, was opposed to the sale of 865 Rite Aid stores to Fred's Inc.^[31] However, the chances of preventing Walgreens from the acquisition because of Rite Aid employees protests and their pushing on the FTC are low.

On June 29th, 2017 Walgreens (WBA) announced the merger was cancelled. Walgreens further added that it would be purchasing 2,186 stores from Rite Aid for a total $5.2 Billion and pay-out a $325 Million dollar penalty for cancelling. Most experts thought that the merger would be completed within a few weeks. Both companies would have about 46% of the market share.^[32] The revised deal--now not including Fred's at all--effectively will see Rite Aid exit the Southeastern United States.^[33]

See also

• CVS Health
• Walgreens

Notes

External links

Wikimedia Commons has media related to Rite Aid.

• Rite Aid Corporation website