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Rite Aid pleased about where it's going.

CAMP HILL, Pa. -- How healthy is Rite Aid? According to John Standley, the retailer's senior executive vice president and chief administrative officer, it is healthier than it has been in some time.

"Our debt level is no longer an issue," he comments. "The challenges at Rite Aid now are like those at many other companies--growing sales, improving cash flow, deleveraging our assets and investing in our business. At $3.9 billion, our debt is in a workable range."

Standley came to Rite Aid with Bob Miller and Mary Sammons after working with them at Fred Meyer Inc., where he was chief financial officer. His most difficult days were the ones he initially experienced at Rite Aid, days when the company's future was very much in doubt.

But Standley invariably saw some bright spots even during the retailer's darkest days. "We were troubled financially, but our same-store sales remained good," he remembers. "And I found great people here, people who cared, people who were willing to gut it out. And throughout, our sales hung in there. We continued to grow the top line."

Standley persevered through three rounds of refinancing and watched as McKesson Corp., "a company that could have sunk us," chose to support the retailer. The most difficult period for Rite Aid's chief administrative officer was the restatement of results. "None of it would have worked out," notes Standley, "if we didn't have good people. That's what impressed me most."

Looking ahead, Standley sees clearer sailing for the once-troubled retailer. "The financial reengineering is over," he claims. "We have put in place strict financial controls and accurate financial reporting. We have a new corporate culture.

"I look forward to a period of liquidity and flexibility, a period during which we concentrate on building our pharmacy business--and, to that end, we have a number of initiatives in place, including stepping up our program for acquiring prescription files. Our front end has recovered with our front-end volume better than Eckerd [Corp.] and quickly closing the gap with CVS [Corp.]. Walgreen [Co.], though, is still a target.

"Our same-store sales, gross margins and EBIDTA [earnings before interest, taxes, depreciation and amortization] continue to improve, and our gross profits continue to increase, while SG&A [selling, general and administrative] expenses decline."

Standley expresses confidence that a number of ongoing initiatives will improve operations and bring further gains.

"We've begun testing a pharmacy loyalty card for seniors," he says. "We have E-prescribing available in 350 stores in 14 states, which will save time for both the physician and the pharmacist and improve accuracy, and we are beginning to roll out our next-generation pharmacy dispensing system, which will speed service and reduce customer waiting time. On-line auctions for retail supplies have begun delivering dramatic savings. We will have digital photo capabilities in over 1,300 stores.

"So I would describe the immediate future as a period of gradual, planned, balanced growth. We've updated our EBIDTA projection for this fiscal year to $700 million to $725 million from $675 million to $725 million and expect sales of between $16.5 billion and $16.7 billion. We have targeted 75 new stores next year, all of which will work to strengthen existing markets. As well, we'll continue to improve the performance of our existing stores. In sum, I couldn't be more pleased at where we are--and where we're going."
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Title Annotation:Rite Aid
Comment:Rite Aid pleased about where it's going.(Rite Aid)
Publication:Chain Drug Review
Geographic Code:1USA
Date:Oct 27, 2003
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