Rite Aid (RAD) was founded by Alex Grass in 1962 in Scranton, Pennsylvania, as a health and beauty store, originally called Thrift D Discount Center. The company changed its name to Rite Aid Corporation in 1968 ahead of its initial public offering (IPO) on the American Stock Exchange (AMEX). In 1970, the company's stock jumped to the New York Stock Exchange (NYSE).
Here's a look at what came next for Rite Aid, including highlights of its growth, scandals, and deals with Walgreens and Albertsons.
- Alex Grass founded Rite Aid in 1962 originally as Thrift D Discount Center.
- Rite Aid acquired Envision Pharmaceutical Services for $2 billion in 2007.
- Former Rite Aid executives admitted to overstating net income between 1997 and 2000.
- Rite Aid abandoned two prospective merger deals—the first with Walgreens in 2017 and the second with Albertsons in 2018.
Rite Aid reported full-year earnings for the 2019 fiscal year in April 2019. The company reported revenue from continuing operations of $21.6 billion for the year, an increase from $21.5 billion from the previous year. Rite Aid reported a net loss from continuing operations for the year of $667 million. The company's loss increased from 2018, which was $349.5 million.
In January 2019, Rite Aid announced that it received notice from the NYSE that it was no longer in compliance with its standard listing rules. That's because the average closing price of Rite Aid's common stock was below the required $1 per share threshold during a consecutive 30-day trading period. The company's share price dropped following the announcement of two failed merger attempts. That changed after Rite Aid executed a 1-for-20 reverse stock split which brought its stock price above $1.
Acquisitions Fuel Growth
Within 10 years of opening its first store, Rite Aid grew to 267 locations in 10 states. The company first achieved $1 billion in sales in 1983. In 1987, with the acquisition of Gray Drug—420 stores in 11 states—Rite Aid became the largest drugstore chain in the U.S., with more than 2,000 stores.
By 1996, Rite Aid doubled in size to 4,000 stores after several acquisitions, including Read’s Drug Store, Lane Drug, Hook's Drug, Harco, K&B, Perry Drug Stores, and Thrifty PayLess.
The company formed a partnership with General Nutrition Companies in 1999. This allowed GNC to open mini-stores within Rite Aid locations. In addition, Rite Aid partnered with drugstore.com, offering Rite Aid customers the ability to place prescription orders online and get same-day, in-store pickup. Also in 1999, Rite Aid acquired pharmacy benefits manager PCS Health Systems.
Rite Aid added more than 1,500 stores in 2007 with its acquisition of the Brooks and Eckerd drug store chains. Eight years later, it acquired pharmacy benefits manager Envision Pharmaceutical Services for $2 billion.
In 1999, Rite Aid began restating earnings from prior years due to accounting irregularities. Six former Rite Aid senior executives were convicted of conspiracy in 2003 regarding a wide range of accounting fraud and false filings with the U.S. Securities and Exchange Commission (SEC).
These executives included former chief executive officer (CEO) Martin Grass, the son of company founder Alex Grass. The former executives admitted to drastically overstating net income from 1997 to 2000 through multiple schemes.
Grass was sentenced to eight years in prison—one of the harshest punishments ever given in connection to an accounting-related crime at the time. Rite Aid was forced to restate its earnings by $1.6 billion.
Deals With Walgreens and Albertsons
However, the deal got hung up on regulatory approval complications from Walgreen’s side. The two companies extended talks into 2017 until they ultimately vacated the merger deal.
Although Rite Aid shareholders approved a merger deal with Walgreens in 2016, the two companies abandoned talks in 2017.
Instead of the merger, Walgreens and Rite Aid agreed to a $4.3 billion deal for Walgreens to buy 1,932 Rite Aid stores and three distribution centers. The deal was approved by the Federal Trade Commission (FTC) in September 2017 and completed in March 2018.
Shortly after the Walgreens deal, Albertsons and Rite Aid began merger talks. On Feb. 20, 2018, the companies announced that supermarket retailer Albertsons agreed to acquire Rite Aid in a deal valued at $24 billion.
However, the companies called the deal off on Aug. 8, 2018, the night before the scheduled shareholder vote, citing opposition from Rite Aid's individual and institutional shareholders.