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Strategies & Market Trends : The Thread Formerly Known as No Rest For The Wicked -- Ignore unavailable to you. Want to Upgrade?

To: G3 who wrote (60537)	9/17/1999 9:21:00 AM
From: Tim Luke	Read Replies (4) \| Respond to of 90042

good morning all: i'm real tired, finally moved into my new house and it took me till 3am to set my office up so i'm going on 2 hrs sleep....let hope nobody steps on my toes today

To: G3 who wrote (60537)	9/19/1999 11:48:00 PM
From: kathyh	Read Replies (1) \| Respond to of 90042

rad article... analysts downplay takeover possibilities... More asset sales seen for Rite Aid Reuters Story - September 19, 1999 10:13 By Robin Sidel NEW YORK, Sept 19 (Reuters) - Rite Aid Corp. , which last week announced the sale of 38 California drugstores, is expected to unload more assets soon in an attempt to pump up a flagging stock price and win Wall Street's confidence. Analysts said the clock is ticking on the drugstore giant, which has been saddled with underperforming sites, is revamping its distribution network and undertaken an aggressive program to build new stand-alone stores. "At this point, the stock is washed out and the earnings consensus needs to come down, but ... the problems are fixable and management should be able to turn things around," said Steven Valiquette of Warburg Dillon Read. The Camp Hill, Pa.-based drugstore chain giant operates some 3,800 stores in 30 states and owns PCS Health Systems Inc., which serves as a middle-man to negotiate discounts between drugmakers and health plans. It also has a 22 percent stake in online retailer drugstore.com. Rite Aid last week canceled a long-planned meeting with Wall Street analysts, citing upcoming potential transactions. Originally scheduled for Sept. 2, the company first had delayed the meeting until Sept. 22 and then canceled it altogether. "We continue to be involved in discussions involving possible corporate transactions that could be material," said Rite Aid spokeswoman Sarah Datz. She declined further comment, noting only that the company would provide analysts with earnings guidance for the rest of year when it releases second quarter earnings on Oct. 11. Analysts expect the company to sell more of the remaining 600 stores on the West Coast, many of which were obtained in the 1996 acquisition of Thrifty Payless. Rite Aid said Wednesday it would sell 38 California stores to Longs Drug Stores for $186 million. Datz noted that many of the stores to be sold to Longs are about double the size of most Rite Aid stores. "Our focus is operating smaller drug stores of about 15,000 square feet," she said. Wall Street analysts said the sale is a good first step for Rite Aid, but more is needed. "Strategically, this is the right move for both Rite Aid and Longs. Rite Aid has had problems properly merchandising these large stores and in-stock conditions were poor," Lehman Brothers analyst Meredith Adler wrote in a report to investors on Friday. After trading as high as $51, shares of Rite Aid are now hovering near a low of $17. On Friday, the stock was up 69 cents at $17.85 on the New York Stock Exchange. The steep drop in the share price has triggered takeover speculation, but most analysts have downplayed those rumors. Chief Executive Officer Martin Grass, whose father founded the company in 1858, is widely considered a tough negotiator who would be unwilling to sell the company until the stock recovers, if at all. "The company is focused on trying to fix it rather than sell it. But they've got to figure it out and figure it out quick," said Eric Bosshard of Midwest Research. Most analysts also rule out an imminent hostile approach, saying that few companies would want to tackle Rite Aid while it is bogged down with the underperforming stores. In addition to the strategic issues, Rite Aid is searching for a chief financial officer to replace Frank Bergonzi, who is retiring in the fall. The company, which has named an acting CFO, and has told analysts it hopes to find a permanent replacement by November. Copyright 1999 Reuters Limited. All rights reserved. Republication or redistribution of Reuters content is expressly prohibited without the prior written consent of Reuters. Reuters shall not be liable for any errors or delays in the content, or for any actions taken in reliance thereon. Headlines Previous Story Next Story