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Rite Aid files for bankruptcy amid slowing sales, opioid litigation

A Rite Aid store stands in Brooklyn on August 28, 2023 in New York City.

Spencer Platt | Getty Images

Rite Aid filed for Chapter 11 bankruptcy protection in New Jersey on Sunday and said it would begin restructuring to significantly reduce its debt.

The company said it reached a deal with creditors on a restructuring plan that includes evaluating its retail footprint and closing underperforming locations.

Rite Aid also said lenders agreed to provide $3.45 billion in new funding to “provide sufficient liquidity” as it embarks on its restructuring plan.

The beleaguered drugstore chain has been grappling with slowing sales, mounting debt and a slew of lawsuits that allege the company helped fuel the nation’s opioid epidemic by oversupplying painkillers. 

During its most recent quarter ended June 3, revenue fell to $5.6 billion, down from $6.01 billion in the year-ago period. Net losses widened to $306.7 million, or $5.56 per share, compared to a net loss of $110.2 million, or $2.03 per share, in the same period a year earlier. 

As a result of the rough quarter, Rite Aid lowered its fiscal 2024 outlook and warned investors it expects to lose between $650 million and $680 million for the full year, which is slated to end in late February.

Rite Aid’s retail pharmacy segment has long been a key growth driver for the company, but that hasn’t been enough to offset its mounting losses.

Plummeting demand for Covid vaccines and testing, a membership reduction in the company’s prescription drug plan and a loss of customers from its Elixir pharmacy benefits business have contributed to a slowdown in revenue at the struggling drug chain.

On Sunday, the company appointed Jeffrey Stein as its new chief executive officer and chief restructuring officer as well as a member of its board. Elizabeth Burr had been serving as interim CEO since January and will remain on the company’s board.

Rite Aid Chairman Bruce Bodaken said in a statement, “Jeff is a proven leader with a strong track record of guiding companies through financial restructurings. We look forward to benefitting from his contributions and leveraging his expertise as we strengthen Rite Aid’s foundation and position the business for long-term success.”

Stein said he has “tremendous confidence in this business and the turnaround strategy that has been developed in recent months.”

An existential crisis for drugstores 

The opioid crisis 

Rite Aid’s financial position and competitive disadvantages are compounded by the many lawsuits it’s facing that allege the company contributed to the nation’s opioid epidemic by knowingly filling prescriptions for painkillers that did not meet legal requirements.

The Department of Justice filed a suit against Rite Aid earlier this year, claiming that it violated the Controlled Substances Act by filling thousands of unlawful prescriptions for controlled substances such as fentanyl and oxycodone.

Rite Aid has asked a court to dismiss the department’s lawsuit and denied allegations that it filled unlawful opioid prescriptions.

— CNBC’s Christine Wang contributed to this report.

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