When the pandemic struck, Rite Aid was already in the midst of revamping its stores and e-commerce business. The company’s stock price plummeted so low two years ago that it was in danger of being delisted from the New York Stock Exchange. Its struggles prompted a leadership and strategy shakeup, including the naming of Heyward Donigan as CEO in 2019.
The global health crisis has inspired the company to tap into consumers’ heightened interest in staying healthy. In a new TV ad, Rite Aid portrays its stores as the best of both worlds: A place with pharmacists with traditional training, but also able to offer advice on alternative and holistic approaches, such as sleep remedies.
Rite Aid Chief Operating Officer Jim Peters said the pandemic “has been a real test of organizational grit, hustle and heart” — but has sharpened its focus on delivering what customers want.
“Gone are the days when retailers white-knuckle on to forcing people into the store to the best they can,” he said. “I embrace the reality that we can win by actually giving consumers what they want, when they want it, how they want it.”
Over the past few months, it’s unveiled a new logo and modernized website, partnered with Instacart for home deliveries and opened its first “stores of the future.” It has three so far, which have a sleeker design and pharmacists stationed in the open rather than in the back and behind a counter. It has swapped out hundreds of products to cater to customers who want wellness-oriented products, such as healthy snacks, holistic remedies and natural skin care products.
Peters said its edge is being “big enough to be a nationally credible player, but yet small enough to be able to pivot on a dime.”
Like all drugstores, the company faces an ongoing headwind: People need fewer cough, cold and flu medications as they largely stay at home. Peters declined to specify how much those sales have dropped, but said it is trying to make up for that with growth in other categories, such as sales of immunity boosting products like vitamins and essential oils.
The company’s performance during the pandemic has caught investors’ attention. Its stock jumped 9% after its third-quarter earnings beat expectations in mid-December. Its shares have risen by about 32% over the past year. That’s compared with shares of CVS and Walgreens, which rose by about 3% and dropped by about 17%, respectively, during that same time period.
Yet Rite Aid must still prove its worth to Wall Street. Its market cap is a tiny fraction of its peers at just shy of $924 million. It’s been tripped up over the past few years by two failed mergers, one with Walgreens and another with grocery chain Albertsons, and struggled to find a way forward.
Tanquilut of Jefferies said Rite Aid is performing better, but said its footprint of stores is smaller and skews toward low-income areas. For its strategy to work, he said, it must show the desire for wellness products and willingness to pay for them has gone mainstream.