Another Drug Store Chain Is Shrinking

(Updated with additional comments from the CEO)

A month after CVS warned that you’ll soon have about 900 fewer stores to choose from, its smaller rival Rite Aid is about to get smaller, too.

Rite Aid announced this morning that it is implementing “the first phase of a store closure program.” That first phase involves closing “an initial 63 stores” in as-yet unidentified locations. Further store closures were implied, but not yet announced.

Rite Aid has already shrunk to 2,488 stores, roughly half as many as it had just a few years ago. But the retailer now says it simply doesn’t need as many physical stores as it once did, as it shifts its focus to digital and delivery. “The notion of omni-pharmacy, that’s what we’re really getting at, doesn’t require that you have as much real estate,” Rite Aid CEO Heyward Donigan told investors. “We do want to continue to have stores, because many people do want to go to a store or to engage with a pharmacist and to pick up other items. But we have seen so much growth in our delivery service, that that leads us to believe this is really a great opportunity… to expand beyond our 17-state footprint to be a national provider of pharmacy in an omnichannel way, not in a brick-and-mortar way.”

Rite Aid’s shrinking store count initially came about as two proposed buyouts fell through in recent years, one of which helped bring about the demise of a third rival drug store chain. Walgreens announced plans to purchase Rite Aid back in October of 2015, so Rite Aid agreed to sell more than 800 stores to smaller competitor Fred’s Pharmacy in order to help clear the way for the Walgreens deal.

But the Walgreens deal was called off. So the Fred’s deal was, too. Fred’s floundered and eventually folded. And Rite Aid ended up selling nearly 2,000 stores – roughly half its nationwide store count – to Walgreens instead of being acquired by them.

Rite Aid cheerfully predicted it would thrive on its own as a slimmed-down company – then Albertsons swooped in with an offer to buy out the chain, which it retracted six months later.

Once again, Rite Aid pledged to thrive on its own.

Well, Rite Aid is indeed on its own these days, but not necessarily thriving. The retailer reported mixed financial results this morning, though investors were cheered by the estimated $25 million in cost savings that Rite Aid says its store closure program will provide.

“The program’s primary focus is to reduce costs, drive improved profitability and ensure that Rite Aid has a healthy foundation to grow from, with the right stores in the right locations, for the communities it serves and for its business,” the company explained about its store closings.

Previous store closings, and the store sales to Walgreens, have left Rite Aid with an odd bicoastal presence. Its stores are most heavily concentrated in the Northeast, and upper Midwest. But the Walgreens deal left Rite Aid without any locations in the South. And Rite Aid recently closed a handful of stores it still had open in Colorado, so now its several hundred stores in California, Oregon and Washington, together with a smattering of locations in Idaho and Nevada, are its only locations west of the Mississippi.

A shrinking store count is not unique to Rite Aid, though. The far larger CVS chain announced last month that it would be closing some 900 locations over the next few years, also aimed at responding to “evolving consumer needs.” Even then, CVS will have about 9,000 locations across the country, which could arguably still be too many. With grocery stores, big-box stores and even dollar stores getting into the pharmacy and wellness business (Dollar General announced plans over the summer to offer more health care products and services in its stores), the big pharmacies are finding there’s not as great a demand for thousands of chain drug stores on virtually every street corner across the country.

Speculation about a new savings opportunity at one of the big drug store chains also fizzled this year, as Coupons.com owner Quotient Technology teased a new receipt-printed coupon program coming to “a major drug retailer” – but then apparently pulled the plug on the whole program before ever announcing which drug retailer would be introducing the new coupons.

So if you frequent a big chain pharmacy to get your prescriptions filled, or just to take advantage of the drug store deals, you’ll soon have fewer locations to choose from. But with competition in the space increasing, among drug stores, supermarkets, dollar stores and more – you may end up with more choices of where to shop, and save, than ever.

Image source: Rite Aid