Rite Aid History: A Quick Look

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 moved over 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.

Financial Performance

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 the threshold. Since then, the stock has traded around $10 per share.

Rite Aid reported full-year earnings for the 2021 fiscal year in April 2021. The adjusted EBITDA for continuing operations for the 2021 fiscal year was $437.7 million, compared to 2020 EBITDA of $538.2 million. The company reported a net loss from continuing operations of $100.1 million for the year, which is a decrease since the previous year's net loss of $469.2 million. Rite Aid has benefited from government programs promoting COVID19 vaccination, and the company has administered over 14 million vaccine doses as of early 2022. The pharmacy also sells masks, sanitizers, and viral testing kits.

Acquisitions to 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 late 2020, Rite Aid agreed to buy Seattle-based Bartell Drugs in a deal worth $95 million.

Accounting Scandal

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

In October 2015, Walgreens (WBA) announced it would acquire Rite Aid for $9 per share. Rite Aid’s shareholders approved the deal a few months later in February 2016.

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.

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.