Financial Struggles: Troubled Drugstore Chain Files for Chapter 11 Bankruptcy
According to The Street, The drugstore retail sector has encountered significant turmoil since the end of the Covid-19 pandemic, with hundreds of store closures as pharmacy chains strive to cut costs and mitigate losses.
Major Pharmacy Chains Lead Store Closures
CVS Health (CVS) initiated a wave of closures in 2021 when it announced plans to shut down 900 of its 9,900 stores, with a strategy to close 300 locations each year in 2022, 2023, and 2024. Following CVS’s lead, Walgreens Boots Alliance (WBA) announced in June 2023 that it would close up to 450 of its Walgreens stores in both the U.S. and the U.K. as part of an effort to simplify its operations.
The Impact of Bankruptcy on Closures
The trend of pharmacy closures escalated with the filing of Chapter 11 bankruptcy by Rite Aid, a nationwide chain, on October 15, 2023. The Philadelphia-based drugstore chain’s bankruptcy petition followed a complaint from the U.S. Department of Justice, which alleged that Rite Aid knowingly filled unlawful prescriptions for controlled substances. At the time of its filing, the company carried about $3.3 billion in debt and faced a potential opioid settlement that could increase its liabilities by another $1 billion. Filing for Chapter 11 allowed Rite Aid to negotiate under bankruptcy protection while closing 154 locations immediately. As it approaches its emergence from bankruptcy, the chain has now shuttered more than 520 of the over 1,200 stores it operated when it filed.
Smaller Chains Struggle to Compete
Smaller pharmacy chains have found it increasingly difficult to compete against giants like CVS, Walgreens, and Rite Aid. Several have also been compelled to file for Chapter 11 to restructure their businesses and remain viable. For instance, Rx Discount Pharmacy, a drugstore chain based in Eastern Kentucky with approximately seven pharmacy and healthcare businesses, filed for Chapter 11 bankruptcy reorganization in the U.S. Bankruptcy Court for the Eastern District of Kentucky on May 1, although it did not provide a specific reason for its filing.
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The Medicine Shoppe Pharmacy Faces Bankruptcy
CL Cressler Inc., the owner of seven Medicine Shoppe Pharmacy stores located in Pennsylvania and New York, filed for Chapter 11 bankruptcy on August 29 to reorganize its debts. The Camp Hill, Pennsylvania-based drugstore owner reported over $1.5 million in assets and more than $12.2 million in liabilities in its petition, indicating that funds would be available for distribution to unsecured creditors.
The largest creditors listed include Commercial Finance Group, owed $6 million; Carol and Clyde Cressler, owed $3.7 million; and Cardinal Distribution, owed over $1.2 million. Despite generating $50.8 million in gross revenue in 2023, a decline from $61.5 million in 2022, the company did not specify the reason for its bankruptcy filing. CL Cressler operates Medicine Shoppe Pharmacy locations in Lancaster, Newport, and Mechanicsburg, Pennsylvania, as well as Binghamton, New York. It also owns long-term care division locations in Pittsburgh and Camp Hill, Pennsylvania, and Binghamton.
Conclusion
The drugstore retail sector is undergoing a period of significant restructuring marked by closures and bankruptcies, particularly among smaller chains. As major players like CVS and Walgreens adapt to changing market conditions, the landscape for pharmacy retailers continues to evolve, posing challenges for those struggling to maintain their operations. The future of the sector will likely depend on how well these companies can navigate these turbulent waters and redefine their business models in an increasingly competitive environment.
