Rite Aid Files for Second Bankruptcy, Announces Job Cuts

(Bloomberg) — Less than a year after completing a restructuring that was supposed to turn the troubled pharmacy chain around, Rite Aid Corp. has filed for bankruptcy again.

The company was unable to secure additional capital from lenders in order to continue operating the business, Chief Executive Officer Matthew Schroeder said in a letter to employees that was reviewed by Bloomberg News. The drug store chain is also planning to cut jobs at its corporate offices in Pennsylvania, according to the letter.

On Monday, a Rite Aid affiliate sought court protection in New Jersey, listing assets and liabilities each of between $1 billion and $10 billion on its Chapter 11 petition. The lenders that backed the company’s emergence in September could have recouped more if Rite Aid had liquidated instead of restructured, Bloomberg News has reported. At the time, the restructuring saved thousands of jobs.

Rite Aid customers will still be able to access prescriptions and vaccines in stores and online, according to a company statement. The firm didn’t return messages seeking comment. A copy of the letter sent to employees was shared earlier on social media. 

In a brief address Monday, Schroeder told employees that all Rite Aid stores would either be closed or sold, according to people familiar with the situation. The company is working with several regional and national buyers who might be interested in parts of the company, but Schroeder didn’t specify who. 

Schroeder blamed the job cuts on “the dramatic downturn in the economy,” tariffs and increased costs from suppliers and landlords. Rite Aid lenders would no longer cover payroll or other employment-related expenses “if we retain the entirety of our workforce,” he said in the letter.

Retail pharmacies have faced numerous challenges in recent years, their profits pressured by falling reimbursements for prescriptions and increased competition on sales of household goods from online retailers and discount chains. Some drugstores have put their products behind locked barriers to deter theft, which has also created a frustrating shopping experience. Walgreens Boots Alliance Inc., one of the largest US pharmacy chains, recently agreed to be purchased by private equity company Sycamore Partners for $10 billion. 

A “significant” Rite Aid vendor recently notified the pharmacy chain that it would be shortening and restricting payment terms which could have the effect of accelerating a company loan, Schroeder also said.

The retailer first filed Chapter 11 in October 2023, using its time in court to cut $2 billion in debt and close roughly 850 locations as part of a plan that handed control of the business over to lenders.

When Rite Aid emerged from bankruptcy in September, it said at the time that it had become a stronger company with “significantly less debt and additional financial resources.”

But it wasn’t enough. The pharmacy still carried more than $2 billion in debt and has struggled with weaker demand and inflationary pressures. 

(Updates with information about bankruptcy filing beginning in first paragraph with additional context throughout.)

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