RITE AID Corporation - History Mission Statement To be a successful chain of friendly, neighborhood drugstores. Our knowledgeable, caring associates work together to provide a superior pharmacy experience, and offer everyday products and services that help our valued customers lead healthier, happier lives.
History (continued) Began in 1958 when Alex Grass incorporated Rack Rite Distributors, Inc 1962: Thrift D Discount Center opened in Scranton, Pennsylvania 1962: U.S. federal legislation repealed the fair trade laws that fixed minimum retail prices on most products : Acquisitions and growth across the US bringing sales in excess of over $1 Billion
THE PROBLEM: INTERNAL MISMANAGEMENT & LACK OF COMMUNICATION 1999: Internal investigation reveals undisclosed holdings between the Corporation and original founders, the Grass Family : Accounting errors and discrepancies reveal losses of $1.06 billion 2003: Martin Grass pleads guilty, and six other former executives are charged with accounting fraud. A civil lawsuit is still pending.
Unionization of Rite Aid Closures of over 250 Rite Aid stores nation- wide Company loses money and leading to poor working conditions Formations of unions begin in search of fair contracts and better lifestyle
Employee Free Choice Act Employees say Rite Aid is trying to undermine the formation of new Unions. EFCA would allow people to freely join a union and give them the freedom to bargain. Employees state Rite Aid engages in “illegal firing.” EFCA gives employees the right petition without intimidation.
ILWU Riots The International Warehouse and Water Union founded in 19 th century along the pacific coast by the longshoremen Riots of unfair treatment in Lancaster, California. Strengthen “alliances with other unions for collective bargaining.”
“Day of Action” December 15,2010: day of protest to raise awareness of unfair treatment of workers. Protests conducted at 40 different stores through-out 13 states. Lancaster, California center of protests. Revolted that “28 times over the increases of their insurers.” 400 employees in New York left without jobs due to store closures.
Strengths Ranked number 100 in the Fortune 500 – 3 rd largest pharmacy in the nation. – About 4,800 stores – $221 million Revenue increase from 2009 to 2010 (View revenue chart next slide) – 67.9% sales from pharmaceutical products and 32.1 % from other over the counter products. – Great employee benefits and over 97,000 associates. – E Business:
Weaknesses Lost over $130 million 2010 Has closed about 229 stores. – Still plans to close 117 as losses double. – Darren Beckom: Former – Rite Aid Employee What’s next?
Weaknesses (continued) Credibility. Bad reputation after: – Rite Aid corporate bust. – Accounting scandal revealed. – Corporate officers arrested, including CEO Martin Grass. – Will stockholders and investors forgive Rite Aid corporate? – Rite Aid has improved and focused more on business ethics.
Weaknesses (continued) Financial weaknesses – Rite Aid has lost $79.07 million in the last quarter of – The 3 rd largest pharmacy has been reporting losses since – Results that shareholders have no more equity. – Rite Aid has a $6.2 billion in long-term debt.
Opportunities Advertising and Credibility recognition: – Non-for-profit organizations – Rite Aid Foundation: Donated $4.9 million to Children’s Miracle Network Donated $50 Thousand to American Red Cross to assist relief efforts in Japan. Awarded grants totaling more than $11 million to about 820 organizations and 488 communities.
Opportunities (continued) Financial side: – Successfully refinanced around $343 million in loans. – Back in the game with NYSE: More potential for prospective Rite Aid investors, and current stockholders/investors. Assessed by consulting companies to improve management. Rite Aid still remains one of the top pharmacies in the nation, being the 3 rd largest drugstore.
Threats Two types of threats: 1) Internal Threats Dangers that can affect business internally, such as employees, employee turnover, union strikes, debt, management, and so on. 2) External Threats Dangers that the company can encounter from the outside (externally). Examples can include: competition, demand, economy, tax increases, inflation, and so on.
Internal Threats (continued) Pharmaceutical products are not the only ones with expiration dates… Unfortunately, union contracts expire as well… – Rite Aid’s contract with United Food and Commercial Workers (UFCW) Local 880. – Contract expired April 2010, still trying to negotiate. – UFCW is on strike against Rite Aid Pharmacies. – Union strike is telling customers to stop supporting Rite Aid – This is has created more negative credibility towards Rite Aid. – More than 60% of sales come from pharmaceutical products!
I nternal Threats (continued) Rite aid is at a $79.04 million loss in last quarter of (Income statement) Rite Aid Income Statement Quarterly-11/27/2010 Total Revenue: $6.20 Billion Gross Profit: $1.64 Billion Operating Income: $63.01 Million Net Loss: $(79.07) Million
External Threats Competitors: None of them have net losses! Walgreens Quarterly Income Statement-2/28/2011 Total Revenue$18.50 Billion Gross Profit$5.32 Billion Operating Income$1.21 Billion Net Income$ Million Publix Quarterly Income Statement-12/25/2010 Total Revenue$6.43 Billion Gross Profit$1.80 Billion Operating Income$ Million Net Income$ Million CVS Quarterly Income Statement-12/31/2010 Total Revenue$24.77 Billion Gross Profit$5.09 Billion Operating Income$1.77 Billion Net Income$1.03 Billion
Proposed Solution Negotiate an agreement that will suit Rite Aid, their employees, their investors, and the union. Rite Aid employees need instruction regarding unions. Improvement in Rite Aid communication towards their employees.
Action vs. Reaction Action is faster than reaction! Rite Aid needs to act as soon as possible in order to overcome the obstacles that face Rite Aid with such threats! Rite Aid is still ranked the 3 rd largest pharmacy in the nation! Rite Aid still has potential to act before reaction hits!
Conclusion Rite Aid Corporation and other unionized drug stores in the New York area have been offered an agreement by the National Health and Human Services Employees Union.. Rite Aid’s part would be to recognize Union 1199 as the collective bargaining agent if more than half of their employees sign cards expressing their interest to join Union 1199 Rite Aid stands to gain at least $40 million through pharmaceutical sales.