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Drugstore operator planning 117 closures to cure its ills

AFTER Rite Aid Corp's loss doubled in the fiscal fourth quarter, the drugstore operator is planning to shut as many as 117 stores over the next year.

The Camp Hill, Pennsylvania, company said the closings will be scattered around the country, targeting stores with weak sales and those that are close to another Rite Aid. Saddled with debt and acquired stores not living up to expectations, Rite Aid is working to cut inventory and expenses.

Rite Aid said its fourth-quarter results were hurt by the recession, along with a fairly mild cough and flu season and the introduction of new, low-cost generic drugs.

About 70 of the stores slated for closure used to be part of the Brooks Eckerd chain. Rite Aid bought 1,850 of those stores in June 2007 for US$2.36 billion, but they have not done as well as Rite Aid's older stores.

Rite Aid had 4,901 stores in 31 states at the end of February, and the moves will leave it with about 2,000 stores °?- less than rivals CVS Caremark Corp and Walgreen Co.

The retailer plans 20 store openings and 55 relocations in fiscal 2010, which ends next February 28. Rite Aid closed 200 stores in fiscal 2008.

The company plans to eliminate 67 stores by the end of May, including 12 stores that were recently sold to Walgreen. Rite Aid also said it will close a distribution center in Georgia.

It has announced two distribution center closings this year, cutting about 360 jobs and saving US$4.9 million a year.

Plunging value

Rite Aid acquired the distribution centers as part of the Brooks Eckerd purchase.

In the fiscal fourth quarter, Rite Aid reported a loss attributable to common stockholders of US$2.3 billion, or US$2.67 per share.

It lost US$960.4 million, or US$1.20 per share, a year ago.

Because of the plunging value of Rite Aid stock, the company wrote down the value of its assets by US$1.81 billion.

About US$1.2 billion of that expense came from writing down the value of the Brooks Eckerd stores.

In a note to clients, Standard & Poor's analyst Joseph Agnese said Rite Aid's poor financial condition creates a lot of risk, although sales are slowly improving and the company is making progress at reducing costs.


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