Rite Aid aims to close some Long Island stores in bankruptcy plan

Rite Aid has filed for bankruptcy protection and plans to sell part of its business as it attempts to restructure while dealing with losses and opioid-related lawsuits.

Rite Aid is asking the bankruptcy court to approve it closing 154 stores, including 12 on Long Island, according to a court filing. But three of the Long Island stores on the list — in Bellmore, Huntington Station and Valley Stream — are already closed.

Employees at some of the other stores said the locations will close by early November. There are currently 38 Rite Aid stores on Long Island.

The company said Rite Aid stores will continue to fill prescriptions, and customers will still be able to visit its locations or shop online while it goes through its voluntary Chapter 11 process. But that process also will allow it to speed up its plan to close underperforming stores.

Going through Chapter 11 will help “significantly reduce the company’s debt” while helping to “resolve litigation claims in an equitable manner,” Rite Aid said late Sunday.

During the 12-month period that ended on Sept. 30, Rite Aid closed approximately 210 stores, leaving the retailer with about 2,100 operating stores as of Sunday, according to a bankruptcy court filing. Most of its locations are on the East and West Coasts.

The Philadelphia company, which is marking its 60th birthday this year, has posted annual losses for several years and has been cutting costs and closing stores as it dealt with long-standing financial challenges. It has said it expects a net loss of as much as $680 million in the current fiscal year, which will end next spring.

The company, like its rivals, also faces financial risk from lawsuits over opioid prescriptions. Rite Aid already has reached several settlements, including one announced last year with the state of West Virginia for up to $30 million.

In March, the U.S. Justice Department intervened in a whistleblower lawsuit brought by former employees under the False Claims Act. Federal officials said in a statement that the drugstore chain filled “at least hundreds of thousands” of illegal prescriptions for drugs including opioids.

Rite Aid called the government’s claims “hyperbolic” in a subsequent motion to dismiss. The company said facts alleged in the case actually showed it exceeded regulatory requirements for diversion control.

The drugstore industry has had to weather tight prescription reimbursement and waning COVID-19 vaccine and testing business in recent fiscal quarters. Plus online competitors like the retail giant Amazon have hurt sales sales of consumer goods found outside the pharmacy areas of their stores.

Rite Aid’s larger competitors like CVS and Walgreens, which each run several thousand more locations, have moved more aggressively into health care, opening clinics and adding other sources of revenue.

Deutsche Bank analyst George Hill said in an August note that Rite Aid operates on a much thinner profit margin than its competitors, and while it can pay costs to service its debt, it won’t be able to cover principal payments “based on the current trajectory of the business.”

The company’s filing in U.S. Bankruptcy Court in New Jersey listed $8.6 billion in total debts and $7.6 billion in assets.

Rite Aid said Sunday that it had reached an agreement with some key creditors on a financial restructuring plan to cut its debt. The company also said it obtained $3.45 billion in fresh financing from some of its lenders, which will help support the company through the Chapter 11 process.

Rite Aid said it will transfer workers from closed stores to other Rite Aid locations where possible.

Gabelli Funds portfolio manager Jeff Jonas noted that the closings could ease some pressure on other drugstores struggling to find workers.

“All those people will get new jobs immediately,” he said. “You hate to say that someone’s bankruptcy is a positive, but it kind of is."

Rite Aid stock last traded at roughly 65 cents a share.

With Tory N. Parrish