Case Analysis

Presented By:
Hannah Muegge
Rebecca Quinones
Emmanuel Rodriguez
Ross Rotwein
 Presentation Overview
• History
• Internal Mismanagement
• Unionization
• SWOT Analysis
• Proposed Solution
• Conclusion
 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• 1962: U.S. federal legislation repealed the fair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
• 1963-1983: 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.
• 1998-1999: 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 19th 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.
SWOT Analysis
 Strengths
• Ranked number 100 in the Fortune 500
– 3rd 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: www.riteaid.com
 Revenue Chart
Revenue (In millions)

$1,000
$900
$800
$700
$600 Revenue
$500
$400
$300
$200
$100
$0
Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010
 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 2010.
– The 3rd largest pharmacy has been reporting losses
since 2007.
– 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 3rd 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!
 Internal Threats (continued)

• Rite aid is at a $79.04 million loss in last

quarter of 2010. (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 $739.00 Million
• Publix
Quarterly Income Statement-12/25/2010
Total Revenue $6.43 Billion
Gross Profit $1.80 Billion
Operating Income $488.93 Million
Net Income $342.10 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 3rd
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.