Opioid settlements and a looming debt in the billions have Rite Aid looking at filing for Chapter 11 bankruptcy, reports the Wall Street Journal.
The filing would cover the pharmacy retailer debt, which now sits over $3.3 billion, and pending legal troubles linked to the allegation of Rite Aid’s role in the opioid crisis. The retailer, however, is not planning on using the Chapter 11 filing to settle with federal, state, and private individuals to resolve the opioid liabilities, the Wall Street Journal said. Instead, the company will treat them as general unsecured claims.
When reached for comment the Philadelphia-based retailer said it did not respond to rumors or speculation.
Rite Aid is involved in more than 1,000 federal cases that were consolidated into a multidistrict litigation in Ohio, the Wall Street Journal reports, and is looking at similar cases in state courts which accuse the retailer of contributing to the opioid epidemic.
The federal government sued Rite Aid back in March, accusing it of filling hundreds of thousands of prescriptions for illegal drugs including opioids between May 2014 and June 2019. The Department of Justice believes Rite Aid ignored any guidance that has been given to pharmacists about illegal drug distribution.
Rite Aid is also involved in other lawsuits, including one filed in the U.S. District Court for the Southern District of New York accusing the pharmacy of misleading shoppers about the health benefits of its Oral Care Dry Mouth Discs.
Rite Aid’s first quarter financial results were dismal. For Q1, the company reported a net loss of $306.7 million (vs. $110.2 million in losses in Q1 2022), adjusted net loss of $40.1 million and Adjusted EBITDA of $91.7 million.
Revenues came in at $5.65 billion, which was about $350 million less year-over-year. At the time, Rite Aid blamed the poor results on the reduction in the company’s Prescription Drug Plan membership and the loss of commercial clients at pharmacy services provider Elixir.
Rite Aid is facing a predicted net loss of as much as $680 million during fiscal year 2023.
In fact, the 2023 fiscal year looked so bleak, interim CEO Elizabeth Burr took time during the Q1 earnings call to focus on potential growth two years from now.
“We continue to believe we are on track to achieve Adjusted EBITDA growth in fiscal years 2025 and 2026,” she said.
Rite Aid closed 25 stores during the first three months of the year, and since 2021 the retailer has shuttered 180 locations. During the Q1 earnings call Matthew Schroeder suggested there could be more store closings as the year unfolded.
Rite Aid has tried to merge with other companies, including Walgreens Boots Alliance and Albertsons, to help with its capital stress over the last few years.
