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Is It The Beginning Of The End For Rite Aid?

|Includes: Rite Aid Corporation (RAD)


Losing money every quarter on an ongoing basis.

Market cap only a little below equity.

Running third in a race with competitors CVS and Walgreens.

After years of poor results, there was a slim hope that someone would come in and buy up the company and save it, save the stores and save the jobs; but with the end of the Albertsons merger it looks like it is the begining of the end for Rite Aid (RAD). Apparently, some shareholders of RAD think that Albertsons was getting a 'steal' and should be forced to pay a higher price to merger with RAD, but from what I am looking at they would be lucky to have completed the deal on the proposed terms. The latest quarterly 10Q report, for quarter ending June 2, 2018, shows the company lost $42 million after one backs out the one time effect of a $256 million gain from discontinued operations; which is better then the prior year quarterly loss of $75 million, but still losing money. The balance sheet shows equity of $1.8 billion and the stock yesterday ended with a market cap of $1.6 billion, so how much more do shareholders really think is justified for a company that looks like it is losing money every quarter? The current stock price of around $1.54 give the company a market cap of $1.64 billion, which is a little lower than the $1.8 billion in equity but the market price is probably being priced for a several more quarterly losses.

It is unfortunate that some kind of deal was not able to be made. Rite Aid unfortunately is viewed as a distant third in the race with CVS and Walgreens and really needed some kind of sale of the company to save the stores and jobs over the long term. My observation is that the Rite Aid stores in my area is that the stores are just simply not in the high traffic areas like the competing CVS and Walgreen stores are. A merger with someone would have helped Rite Aid to be able to fix itself.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.