a. Generate an action plan to implement the strategies you discussed for Rite aid (RA) business turnaround.

b. discuss how you plan on disseminating (to distribute, spread, broadcast) the information of your plan which will lead to the RAC's renewal or business turnaround.

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Notes:

Q. Rite Aid (RA) is a publicly traded company currently experiencing decline. what led to the decline?

A. Rite Aid Corp. - publicly traded company (RAD - $7.32) (Yahoo finance, 2022, June 29)

Rite Aid is closing stores and looking for ways to boost its revenue as it faces widening losses and a pile of debt. Rite Aid's net debt totaled $2.7 billion in Feb, 2022. The company's ratio of net debt to EBITDA stood at 5.4 times when its latest fiscal year ended on Feb. 26, 2022. The company wants to reduce its leverage ratio to 4.5 times by February 2025, which would still be higher than those of some of its rivals, including Walgreens and CVS.

Rite Aid has amassed debt over the years, largely through its purchase of pharmacy-benefit manager Envision Pharmaceutical Services, which it bought for about $2 billion (Ashworth, 2020). As per Evercore ISI, financial services firm, Rite Aid lags its rivals in part because it generates less revenue per store, due to more locations in lower-income areas. The company's debt position is overall not great since its EBITDA has been declining, which makes it hard to reduce the debt load (Maurer, 2022).

Rite Aid Turnaround Strategy -

It's CFO, Matt Schroeder said that driving growth will ultimately generate increased EBITDA (earnings before interest, taxes, depreciation and amortization) and allow more of this debt to be paid off. Rite Aid plans to reduce its leverage ratio in part through closing stores and building prescription volume, which in turn would bolster the cash flow it uses to repay debt. Rite Aid also recently completed a $150 million cash tender offer, its latest move to pay down debt and buy back some of its publicly traded bonds at a discount. The company has no debt coming due until 2025, when $485 million in bonds mature (Maurer, 2022).

CEO Heyward Donigan, who joined Rite Aid in August 2019 has a turnaround plan focusing on becoming the dominant mid-market pharmacy benefits manager (PBM), leveraging its more than 6,400 pharmacists to provide customers with whole-health and wellness solutions, and revitalizing Rite Aid's retail and digital experience (Ashworth, 2020).

References

Ashworth, W. (2020, April 28). Bankruptcy Watch: 10 Retail Stocks at Growing Risk. Kiplinger. https://www.kiplinger.com/slideshow/investing/t052-s001-bankruptcy-watch-10-retail-stocks-at growing-risk/index.html

Maurer, M. (2022, June 29). Rite Aid CFO Looks to Cut Debt as Earnings Suffer. The Wall Street Journal. https://www.wsj.com/articles/rite-aid-cfo-looks-to-cut-debt-as-earnings-suffer-11656535577?siteid=yhoof2

Yahoo finance. (2022, June 29). Rite Aid Corporation (RAD).https://finance.yahoo.com/quote/RAD?p=RAD

Cameron, K. S., Kim, M. U., & Whetten, D. A. (1987). Organizational effects of decline and turbulence.Administrative Science Quarterly,32(2), 222-240. https://doi.org/10.2307/2393127

Cranfield School of Management. (2015, August 13).Turning around a company in distress[Video]. Retrieved fromhttps://www.youtube.com/watch?v=1539ZSVEs10[8:52]

Hrmasia. (2016, May 11).Corporate turnaround strategy[Video]. Retrieved fromhttps://www.youtube.com/watch?v=YrCa79Z_1mc[8:10]

Raina, B., Chanda, P., Mehta, D. P., & Maheshwari, S. K. (2003). Organizational Decline and Turnaround Management.Vikalpa: The Journal for Decision Makers,28(4), 83-92. https://doi.org/10.1177/0256090920030408

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References

• Naglewski, K. E. (2018, March). The 'softer' side of managing a turnaround.Journal of Corporate Renewal, 31(2), 14-19. Retrieved fromhttp://www.tmajcr.org/journalofcorporaterenewal/march_2018/MobilePagedArticle.action?articleId=1360346&app=false#articleId1360346

• Schweizer, L., & Nienhaus, A. (2017). Corporate distress and turnaround: integrating the literature and directing future research.Business Research, 10(1), 3-47.

• Turnaround Management Association. (n.d.).Code of ethics.https://turnaround.org/code-ethics

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