Essential retailer in bankruptcy announces store closures

February 28, 2024 | by


The article discusses the challenges faced by essential retailers in bankruptcy and the impact it has on store closures. Chapter 11 bankruptcy provides these retailers with an opportunity to restructure their expenses and debt, but it comes with significant risks. Damaged relationships with suppliers, bankers, workers, and customers are common, and shareholders often face losses. Despite these risks, bankruptcy is becoming increasingly common among retailers struggling to compete against e-commerce giants like Amazon and big-box retailers like Walmart and Costco. The article specifically focuses on the bankruptcy of major pharmacy retailer Rite Aid, exploring how fierce competition, rising expenses, and legal issues have forced the company to sell assets, close stores, and consider selling itself entirely.

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Essential retailer in bankruptcy announces store closures

Chapter 11 bankruptcy and its implications

Chapter 11 bankruptcy allows retailers to reshuffle their expenses and debt, providing critical wiggle room necessary to give them a shot at long-term survival. This type of bankruptcy allows retailers to reorganize their financial affairs while continuing their operations. It is considered a last resort for management teams, as it often results in significant changes and sacrifices.

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One of the implications of Chapter 11 bankruptcy is the damage it causes to relationships with stakeholders. When a retail store chain files for bankruptcy, it can strain relationships with suppliers, bankers, workers, and customers. Suppliers may become wary of providing goods or services to the company, fearing they may not be paid. Bankers may be hesitant to provide additional financing or credit. Workers may face uncertainty about their jobs and future prospects. Customers may lose confidence in the company and choose to shop elsewhere. Overall, the reputational damage and strained relationships caused by bankruptcy can have long-lasting effects on the business.

Another implication of Chapter 11 bankruptcy is the impact it has on shareholders. When a retailer is publicly traded, shareholders are at risk of losing their investments if the company goes bankrupt. Even if the company survives and emerges from bankruptcy, it may be less attractive to shareholders who have already experienced significant loss. This can make it difficult for the company to raise capital and regain investor confidence in the future.

Store closures and asset sales are common during Chapter 11 restructuring. These measures are taken to reduce costs and optimize the company’s operations. However, they can have significant implications for customers and communities. If the retailer offers essential products or services that are hard to find elsewhere, store closures can leave people without access to the products they need. This can particularly impact vulnerable populations who rely on the retailer for essential items.

Despite the risks and challenges associated with bankruptcy, it has become increasingly common among retailers struggling to compete in the current market. Brick-and-mortar stores face intense competition from e-commerce giants like Amazon and big-box retailers like Walmart and Costco Wholesale. These retail behemoths have experienced significant growth in recent years, while smaller retailers struggle to keep up. The ability to negotiate lower prices and offer a wider selection of products gives these larger players a competitive advantage.

Competition and struggles of brick-and-mortar stores

The struggles faced by brick-and-mortar stores can be seen through examples of store closures. Once thriving retailers like Sears, Bed Bath & Beyond, and Christmas Tree Shops have experienced significant decline and closures in recent years. Sears, which once operated 700 stores, filed for bankruptcy in 2018 and now operates only 13 stores. Bed Bath & Beyond, with 1,500 stores in 2018, went bankrupt in 2023 and now all its stores are closed. Christmas Tree Shops, with over 80 stores, closed all of them in the past year. These closures are a result of the intense competition faced by brick-and-mortar stores from e-commerce and big-box retailers.

Superstores like Walmart and Costco Wholesale, along with e-commerce giants like Amazon, have contributed to the struggles of brick-and-mortar stores. The annual revenue of Walmart has surged from over $450 billion to $648 billion in the past decade. Costco’s revenue has more than doubled, with estimated sales of over $250 billion this fiscal year. Amazon has seen its sales increase from $74 billion to an expected $641 billion this year. The growth of these retail giants has come at the expense of smaller retailers who struggle to compete on price and selection.


Bankruptcy of major pharmacy retailer

Rite Aid, a major pharmacy retailer, is one of the latest retail chains to suffer the consequences of fierce competition from larger players. In 2023, Rite Aid experienced a decline in sales as expenses increased, particularly due to the interest owed on its significant debt. Rite Aid faced stiff competition from industry leaders CVS Health, Walgreens Boots, Walmart, and others.

The competition from larger players was not the only challenge for Rite Aid. It also faced existential threats, including a civil suit filed by the Department of Justice. The suit alleged that Rite Aid pharmacists were filling prescriptions for controlled substances despite obvious red flags and intentionally deleting internal notes about suspicious prescribers. This lawsuit, along with the rising interest expenses on Rite Aid’s debt, made it difficult for the company to operate profitably.

Asset sales and store closures by Rite Aid

As part of its bankruptcy restructuring, Rite Aid has engaged in asset sales and store closures. These measures are aimed at reducing debt payments and optimizing the company’s operations. Rite Aid has exited the pharmacy benefit manager (PBM) market, selling Elixir to MedImpact for $576.5 million in February. This strategic move allows Rite Aid to focus on its core business and reduce its financial burdens.

Since filing for bankruptcy, Rite Aid has announced multiple rounds of store closures. In 2023, it announced 354 store closures, and more closures have been announced in 2024. The reduction in the number of stores is part of Rite Aid’s efforts to streamline its operations and cut costs. Currently, Rite Aid operates in 16 states with 1,704 stores, a significant decrease from its previous operations.

The financial situation of Rite Aid is challenging, with a loss of $18 million in the month ending January 27. The company has disclosed current assets of $7.4 billion and liabilities of $10.1 billion. To improve its financial position, Rite Aid is exploring the possibility of selling the entire company. The deadline for bids is approaching, and if a rival acquires Rite Aid, it is likely that more store closures will occur in overlapping markets.

Overall, Rite Aid’s bankruptcy and restructuring efforts are aimed at addressing its financial challenges and positioning the company for future success. However, the future remains uncertain, and further store closures may be necessary to ensure the company’s long-term viability.


Chapter 11 bankruptcy has significant implications for retailers and their stakeholders. While it provides an opportunity for debt restructuring and cost optimization, it also comes with challenges and sacrifices. Retail store chains often experience damaged relationships with suppliers, bankers, workers, and customers. Shareholders face the risk of losing their investments and may be less inclined to invest in the company again. Store closures and asset sales can leave customers without access to essential products and services.

The struggles of brick-and-mortar stores are evident in the examples of store closures. Intense competition from e-commerce and big-box retailers has forced many retailers to close their doors. Small retailers find it difficult to compete on price and selection, leading to a decline in their market share.

The bankruptcy of Rite Aid, a major pharmacy retailer, highlights the challenges faced by retailers in the healthcare industry. Competition from larger players and existential threats can cause significant financial burdens. Rite Aid’s asset sales and store closures are aimed at reducing debt and optimizing operations.

In conclusion, Chapter 11 bankruptcy and the struggles of brick-and-mortar stores have had a significant impact on the retail industry. While some retailers are able to adapt and survive, others face insurmountable challenges and are forced to make difficult decisions. The future of the retail industry remains uncertain, but it is clear that retailers must continually evolve and innovate to stay competitive in today’s market.

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