Rite Aid cut 400 corporate jobs and replaced its top team to save $55M a year

In March 2019 Rite Aid announced it was cutting about 400 full-time positions — more than 20% of corporate roles at headquarters and across the field organization — and overhauling leadership at the same time. CEO John Standley stepped down, staying on only until the board appointed a successor. Bryan Everett was promoted to chief operating officer, Matt Schroeder to CFO, Brian Hoover to chief accounting officer and Jocelyn Konrad to EVP of pharmacy and retail operations, while Kermit Crawford, Darren Karst and Derek Griffith left the company.

The cuts reflected a company that had already shrunk. After the merger with Walgreens collapsed in 2017, Rite Aid sold some 2,000 stores to its rival and closed others, leaving a smaller footprint with a cost structure built for a bigger business. The restructuring — two-thirds of the reductions effective immediately, complete by the end of fiscal 2020 — would save about $55 million a year, about $42 million of that within fiscal 2020, against a one-time charge of roughly $38 million. The savings would offset diminishing Transition Services Agreement income from Walgreens.

Moody's vice president Mickey Chadha called the moves imperative — necessary to align the company's cost structure to its smaller size — but 'not a panacea' given intense pressure from much larger, better-capitalized CVS and Walgreens. Those rivals had moved assertively into the medical side of health care and performed better at the front of the store: per Edge by Ascential's Health, Beauty and Personal Care report, Walgreens and CVS contributed 64% of the top 10 specialists' health and beauty sales in 2018.

About $55M in annual savings, roughly $42M of it within fiscal 2020, against a one-time restructuring charge of about $38M — per the company

Rite Aid's footprint had shrunk by about 2,000 sold stores plus closures, but its corporate cost structure had not followed.

Transition Services Agreement income from the Walgreens store sale was rolling off, so the savings had to replace revenue that was disappearing.

CVS and Walgreens were pulling away on scale and health services; Moody's called aligning costs to the smaller company imperative.

The board paired the downsizing with near-complete turnover of the executive team, replacing the CEO, COO, CFO and more at once.

Match the cost base to the company you actually are: a shrunken business running a full-size headquarters burns margin it no longer earns, and the propping-up revenue was rolling off.

Rite Aid expected the shake-up to be complete by the end of fiscal 2020, with about $42 million of the savings realized that year as two-thirds of the cuts took effect immediately. Moody's Chadha called the $55 million 'not a panacea of all that ails Rite Aid' but a positive given the intense pressure from much larger, better-capitalized rivals. The roughly $38 million one-time restructuring charge was the price of shrinking the overhead to match a company that no longer owned 2,000 of its stores.