Posted 5 hours ago5 hr comment_13232 Beleaguered pharmacy chain Rite Aid has officially filed for Chapter 11 bankruptcy protection after weeks of media reports suggesting that it was on the cusp of doing so. The bankruptcy is Rite Aid’s second in two years, and it leaves a lot of questions for both customers and employees, including whether stores will be closing, if there will be layoffs, and what happens to customers’ prescriptions. Here’s what you need to know about Rite Aid’s second bankruptcy. Why did Rite Aid file bankruptcy the first time? Rite Aid originally filed for bankruptcy in 2023. It emerged from the process less than a year ago, in 2024, with the hopes of being in a better financial position and on more resilient footing. But with its second bankruptcy filing yesterday, those hopes seem to have been dashed. To understand why Rite Aid is once again filing for bankruptcy, it helps to understand why the company originally filed for bankruptcy in 2023—something Rite Aid has laid out in detail in documents it filed with the United States Bankruptcy Court in the District of New Jersey today. Rite Aid cited multiple factors that necessitated its 2023 bankruptcy filing, including: “suboptimal lease portfolio” of underperforming stores elevated labor costs increased costs from “shrink” (theft) lower credit limits more restrictive payment terms from vendors reduced demand for its non-medication “front end” products “The lack of such inventory,” Rite Aid said, “gave rise to a vicious cycle: high-margin front-end sales declined due to insufficient inventory, and lagging sales depleted liquidity and caused vendors to tighten trade terms even further.” The company’s 2023 bankruptcy was meant to help the struggling pharmacy chain address the financial issues caused by these problems. But that’s not the way things have played out since, which has led to the company filing its second bankruptcy this week. Why is Rite Aid filing for bankruptcy again? In a court document, Rite Aid said that its “post-emergence business plan was based on data-driven projections (and extensive discussions with vendors) that Rite Aid’s front-end vendors would return to their less restrictive prepetition payment terms” as well as assurances from select capital providers that the company would be provided with the needed letter of credit facilities—all of which the company said “was crucial to Rite Aid’s recovery.” But the filing goes on to say that “Those assurances were broken.” Rite Aid said that the letters of credit it did obtain were “materially less than expected” and that many vendors didn’t end up relaxing the more restrictive payment terms to the anticipated levels. Pile on macroeconomic pressures to this and Rite Aid said that “The combined effect of lower-than-expected liquidity from the letter of credit facilities, inventory challenges, strained vendor relations, lower consumer spending, and competitive pressures has ultimately left the Company with insufficient liquidity to operate its business and service its debt obligations in the ordinary course.” Thus, it’s second bankruptcy filing this month. What’s happening with Rite Aid prescriptions? Of course, many customers will be concerned about what will happen to their prescriptions during the bankruptcy process. In a letter to customers dated May 5, Rite Aid said that one of its paramount priorities during the bankruptcy process is to ensure that customers’ pharmacy needs are not interrupted. Rite Aid says that a majority of its stores will remain open “for the next few months” and that during that time pharmacy services “including prescriptions and immunizations” will remain available. In other words, for a few months at least, most customers should be able to still get their prescriptions filled at their local Rite Aid store. However, the company also stated that it’s “working to facilitate a smooth transfer of customer prescriptions to other pharmacies.” This is most likely in preparation for inevitable Rite Aid store closures or sales. Are Rite Aid stores closing? Some already have, and more closures in the months ahead are almost a certainty. According to documents Rite Aid that filed with the court, these 11 locations have already closed or will close soon: Poughkeepsie, NY Redmond, WA Sunnyside, WA Craigsville, VA Costa Mesa, CA Harrisburg, PA Keene, NH Ridgewood, NY Kutztown, PA Neptune, NJ Halifax, PA Rite Aid also says that customers can keep an eye on which stores are open using its online store locator tool. The locator currently states that Rite Aid has 1,240 locations in the United States across 15 states. What’s happening to Rite Aid employees? It is thought that Rite Aid’s bankruptcy will see some store locations closed, while other stores will be sold to other entities that may seek to keep the stores running in some fashion. Indeed, in a press release confirming its bankruptcy plans, Rite Aid CEO Matt Schroeder said that he was “encouraged by meaningful interest from a number of potential national and regional strategic acquirors.” But inevitably, layoffs are to be expected, as Schroeder said that one of the company’s priorities was “preserving jobs for as many associates as possible.” Yesterday, Bloomberg reported that an internal letter was sent by Schroeder to employees that the company will begin cutting jobs at its corporate offices in Pennsylvania. What will shopping at Rite Aid be like while this is happening? Although the company says most stores will remain open for the next few months, expect to notice changes before then. In a letter to vendors, the pharmacy chain said, “At this time, Rite Aid has generally stopped purchasing goods and services, except for those that it believes are essential to supporting this process.” Customers should also be aware that Rite Aid has posted a banner on its website stating that as of June 5, the company will no longer honor Rite Aid gift cards and will no longer accept returns or exchanges. View the full article
