Rite Aid Files For Bankruptcy After Delaying Financial Results Last Week
Rite Aid (NYSE: RAD) filed for Chapter 11 bankruptcy on Sunday in New Jersey after grappling with numerous lawsuits tied to the opioid crisis. The company has been unable to generate the funds required to settle these claims, which allege over-supply of prescription painkillers.
Founded 61 years ago, the company now risks over 47,000 jobs as it teeters on the brink of collapse. With 2,100 stores currently many are slated to close as part of the ongoing restructuring process. Jeffrey Stein, head of a financial advisory firm, is set to take over as the new CEO, while Elizabeth Burr, the current interim CEO, will maintain a seat on the board.
A Justice Department complaint further adds to Rite Aid’s woes, accusing the drugstore of ignoring evident “red flags” while dispensing opioids. While the company denies these allegations, the bankruptcy filing will temporarily halt all pending litigation. Rite Aid spokesperson stated that the company plans to “negotiate a resolution of the opioid-related lawsuits” and address other outstanding issues.
However, the opioid-related lawsuits aren’t Rite Aid’s only challenge. Over the past five years, the company, which lags behind market leaders CVS and Walgreens, has accumulated over $2 billion in net losses. The last decade saw Rite Aid’s store count halve after failed merger attempts.
With a dwindling cash reserve of about $140 million as of June, and looming debt obligations, the company has struggled to find a path forward. On Thursday, the firm filed a Form 12b-25 with the Securities and Exchange Commission, indicating that it would be delaying its financial results for the quarter ended September 2, 2023.
The delay in filing was blamed on the company continuing to engage in reviewing strategic alternatives to recapitalize, refinance, or otherwise optimize its capital structure. The company also noted in the filing that it “expects to report a significant increase in net loss for the quarter,” which relate to impairment charges, litigation charges, and higher professional expenses. A significant increase in outstanding debt is also expected.
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