Rite Aid to unveil rebound plans following scuttled deals

Angelica LaVito

Rite Aid Corp. will unveil plans for a turnaround at an online analyst day Monday, after two thwarted merger attempts left the drugstore chain wounded and much smaller than its rivals.

The company will change its logo, shift its product offerings and remodel some stores in a bid to appeal to a younger demographic, Chief Executive Officer Heyward Donigan said in an interview with Bloomberg News. Electronics and clothing will be replaced on the shelves with organic pet food, “on-trend” skin care and other items.

“Less vodka, more White Claw,” said Donigan, referring to the flavored alcoholic seltzer beverage that’s popular with young adults.

Rite Aid’s debt levels soared after it failed to complete two proposed deals, the first with rival Walgreens Boots Alliance Inc. in 2017 and the second with Albertsons Cos. in 2018. Its stock price fell so low the company executed a reverse stock split to keep trading on the New York Stock Exchange.

On Monday, Rite Aid shares were down 16% at $9.87 at 10:05 a.m. in New York, sliding as the broader market declined due to fears about the economic impact of the coronavirus outbreak.

Donigan, who joined Rite Aid in August, spent the first seven months of her tenure trying to shore up the company’s finances. Having made “significant progress,” Donigan said, she’s now focused on Rite Aid’s future.

Drugstores across the board are under pressure. Insurers are paying pharmacies less to fill prescriptions, while digital competitors like Amazon.com Inc.-owned PillPack are trying to persuade people to fill their prescriptions digitally. Additionally, consumers are buying more food, toilet paper and beauty products online.

Rival chains CVS Health Corp. and Walgreens are adding health services in their stores, such as lab testing and diabetes management, to bring customers in. Rite Aid is taking a different approach. The company wants to spruce up its retail offerings to broaden its appeal beyond its existing customers, who tend to be older, and attract women between the ages of 25 to 49.

“Not only is it a growing demographic, but when you get that one woman caregiver, you get not only the one woman,” Donigan said. “You get her kids, her pets and her parents. It’s sort of like a five-for-one opportunity.”

Merchandise will be revamped at all of Rite Aid’s 2,464 stores. At the pharmacy counter, more veterinary medications will be available for people to fill their pets’ prescriptions where they fill their own.

The chain also plans to reveal a new logo and color scheme. Store exteriors, signs inside of stores, labels and bags will all need to be updated. People will start to see changes in some stores in September, the company said.

Some stores will be redesigned entirely to look more like a beauty destination than a drab pharmacy. Rite Aid will renovate nine stores across the country later this year, with plans to remodel another 65 stores in Boise, Idaho, and Norfolk, Virginia, in the new format within the next year, still just a fraction of Rite Aid’s footprint.

The company is also rebranding its pharmacy-benefit manager to try to capture a larger slice of the market, dubbing it “Elixir.” Donigan thinks the business, which now produces about $6 billion in revenue, can capture more share by catering to regional insurers. The three dominant pharmacy-benefit managers are all owned by insurers.

“I was very relieved when I got to the company because there are so many issues, even more than I realized, but it’s all upside,” she said. “Most of the issues are fixable.”

Rite Aid moved its analyst day online, scrapping a planned event in midtown Manhattan due to coronavirus fears.