Rite Aid focuses on turnaround following $749.9 million in losses
- Rite Aid interim CEO Elizabeth Burr detailed Rite Aid’s efforts to turnaround its struggling business.
- The drug store chain reported $749.9 million in losses during the 2023 fiscal year.
- Turnaround strategies include focusing on its pharmacy business, improving in-store experience and optimizing inventory.
Rite Aid is focused on implementing a turnaround strategy following $749.9 million in net losses in the 2023 fiscal year.
Rite Aid’s earnings in fiscal 2023, ending March 4, were detailed during the drug store’s fourth-quarter April 20 earnings call. Overall losses for the fiscal year were $13.71 per share, for an adjusted net loss of $174.3 million across the fiscal year. In the fourth quarter, Rite Aid reported losses of more than $241 million or about $4.39 per share.
The pharmacy chain has spent roughly the past year closing around 145 unprofitable stores and has faced numerous challenges, including a decline in visits from COVID-19 vaccines and testing. For the overall fiscal year 2023, Rite Aid reported $24.1 billion in revenue, down from $24.6 billion in revenue in the 2022 fiscal year. In the fourth quarter, Rite Aid reported roughly the same revenue — $6.09 billion — as in the same quarter last year — $6.07 billion — due, in part, to an extra week in the quarter in 2023.
On the call, Rite Aid interim CEO Elizabeth “Busy” Burr said Rite Aid was focused on implementing a turnaround strategy that centered on improving the performance of several areas of its business.
“We believe that this model, that is geared to drive performance and acceleration across the enterprise, will enable us to organize effectively and efficiently to capture value and drive growth,” Burr said on a call with investors. “I am also well aware we need to prove it.”
The drug store chain will focus on improving its pharmacy business by continuing to invest in Med Adherence, or ensuring patients properly follow the instructions of medical providers. Rite Aid plans to expand a pilot program from the fourth quarter focused on enhanced message timing and content related to prescription refills. During the pilot, Rite Aid said the program produced a 60-basis point reduction in abandoned prescriptions.
Another area of improvement involves optimizing inventory. Burr said Rite Aid would focus on space productivity in-store by replacing over-spaced categories with ones that are faster growing. Rite Aid plans to introduce further inventory controls by reducing inventory by 40 million in the fiscal year, Burr said on the call.
It also plans to improve product relevancy based on region through a store-clustering initiative, Burr said, citing success with a regionally focused assortment at Bartell’s, the Seattle drug store chain it purchased in 2020. Rite Aid also plans to focus on improving pricing analytics and increase the number of prize zones to create a varable price zone structure, Burr told investors.
Other changes aimed at turning the business around include rebuilding its indirect buying process, renegotiating contracts and leases, and reducing prescription brand inventory by using just-in-time ordering models and implementing new controls, she said.
The drug store chain doesn’t expect the turnaround effort to net immediate success. The company anticipates a net loss in the 2024 fiscal year ranging between $439 million and $466 million.