This past Tuesday, the drugstore chain Rite Aid (NYSE: RAD) revealed that it intends to shut down as many as 63 of its store locations as it assesses the exact number of physical locations that it requires as the company transitions into a digitally focused strategy.
Rite Aid stated that these shutdowns were a result of continued review, and that it intends to discover more of its stores to close in the coming months.
The company revealed that its objectives are to take away costliness, enhance profitability, and to have "a healthy foundation." It said that its 63 shutdowns, which started this past month, anticipate a raise in earnings prior to interest, taxes, depreciation, and amortization by around $25 million.
This particular move from Rite Aid was intended in order to make business much more competitive, particularly against rivals such as Walgreens (NASDAQ: WBA), CVS Health (NYSE: CVS), and Walmart (NYSE: WMT) pharmacies. The company chose not to reveal any specific locations of the shutdowns that started in November.
Rite Aid has said that it has over 2,400 retail pharmacy locations throughout 17 states, whereas CVS and Walgreens have over 9,000 stores.
"The decision to close the stores is one we take very seriously as we evaluate the impact on our associates, our customers and our communities," Rite Aid CEO Heyward Donigan said following the company's recent quarterly earnings report. Donigan revealed that employees who have been affected by these store closures would be given the chance to transfer to other stores. In the meantime, the pharmacy chain will ensure that prescription transfers to other store locations are "automatic and seamless," according to Donigan.
In terms of its success, Rite Aid has overall been losing profit throughout fiscal quarters lately, especially this past fiscal third quarter. In its earnings report, the company relayed that it has experienced net loss of over $36.1 million, or $0.67 per share.
Rite Aid is overall making a move in the right direction when it comes to shutting down its store locations. Store employees may be forced to transfer to other locations, which may make it more difficult in terms of adaptability. But although it may be a concern in terms of profitability, the transition to having less Rite Aid stores could make it generally more competitive.