Rite Aid (RAD) stock fell more than 50% on Friday After the Wall Street Journal reported The retail pharmacy is preparing to file for Chapter 11 bankruptcy as it faces increased costs related to opioid-related lawsuits.
A source familiar with the matter confirmed to Yahoo Finance that bankruptcy planning is underway, and part of that plan likely includes closing more than 400 stores.
Asked about bankruptcy preparations on Friday, Right Aid said: “We don’t comment on rumor and speculation.”
Over the past year, the company’s stock has lost 90% of its value. Yahoo Finance data showed that the company’s market value as of Friday was $41 million.
In a statement to Yahoo Finance, Rite Aid said, “We’ve closed 239 stores since 2021. Like all retail businesses, we regularly review each of our locations to make sure we’re meeting the needs of our customers, our communities, and the business in general.”
In 2022, the company closed a planned 145 stores, and more are expected to open this year. In the most recent quarter ended June 3, Rite Aid closed 27 stores. As of June 3, it operated 2,284 pharmacy locations.
The preparations come after the company was sued by the US government in April over its failure to detect what the Justice Department called “red flags” about the dispensing of prescriptions for opioids and other pain relievers.
According to the Journal, the bankruptcy filing will list these opioid claimants as unsecured claimants. Additionally, bankruptcy can help Rite Aid deny rent payments at stores it plans to close, a common tactic used in retail bankruptcies to reduce costs. The newspaper also reported on Friday that the company faces more than 1,000 federal lawsuits that have been consolidated in Ohio.
In April, Elizabeth Burr, interim CEO of Rite Aid, said on the company’s earnings conference call in response to a question about opioid litigation, “I think it’s very difficult, as you can imagine, to predict litigation. That’s all we can tell you.” What we’re facing is exactly the same as what everyone else in the industry is facing.”
in it Annual report submitted in MayRite Aid said: “Although we believe we have sufficient sources of liquidity to meet our projected requirements for working capital, debt service and capital expenditures for at least the next 12 months, it is impossible to estimate with certainty the costs associated with these legal actions, and they could It exceeds any applicable insurance coverage, and could significantly affect this liquidity.”
Revenue in Rite Aid’s last quarter, the first quarter of its fiscal 2024 year, fell about 7% to $5.65 billion. Its net loss for the quarter was $306 million.
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