Rite Aid Attributes Bankruptcy Return to Empty Shelves, Shopper Trade-Down

Rite Aid has claimed in a court filing Tuesday (May 6) that its inability to sustain a successful recovery and its subsequent return to bankruptcy protection is primarily due to sparsely stocked store shelves and to trade-down from lower-income consumers.

In this court declaration, Marc Liebman, Rite Aid’s chief transformation officer, detailed how post-emergence inventory shortages created a “vicious cycle” where diminishing liquidity led to empty shelves, and vice versa.

The core of the inventory issue stemmed from unexpected financial constraints. Rite Aid had planned on accessing approximately $166 million from replacement credit facilities and other cash sources following its emergence from bankruptcy in 2023. However, certain lenders “delayed and in some cases walked away” from earlier commitments regarding these facilities’ terms and timing.

Ultimately, only one loan for $66.75 million was secured in November, which Liebman described as “a fraction of the amount originally contemplated” and received “too little and too late” to adequately replenish inventory for the critical holiday shopping period.

Indeed, shelf-stocking can be key to retaining customers. A 2021 PYMNTS Intelligence study found that 47% of pharmacy customers said that ensuring products are in stock and available to buy would improve their loyalty to merchants.

Additionally, Rite Aid’s post-emergence business plan assumed vendors would return to less restrictive payment terms and return deposits from the previous bankruptcy. However, Liebman stated that many front-end vendors refused to loosen terms.

Rite Aid also sees its difficulties as being due in part to lower-income shoppers’ trade-down behavior. Liebman noted “a structural shift in its market, primarily resulting from changed customer behavior,” citing “low- and fixed-income consumers” shifting to purchasing household goods from more affordable retailers.

PYMNTS Intelligence research indicates that the vast majority of shoppers change their behaviors in periods of economic distress. In a 2024 study, only 16% of individuals said perceived inflation had not changed their consumption when purchasing retail products.

In Tuesday’s filing, Liebman emphasized the importance of keeping non-pharmacy sections stocked, stating it is “critical for the front end to be stocked with readily available inventory for customers to purchase when visiting the store,” especially given the impulse nature of many such purchases.

These combined pressures created a “negative trajectory that could not be turned around,” leading Rite Aid to file for Chapter 11 protection once again to pursue an orderly sale process.

The post Rite Aid Attributes Bankruptcy Return to Empty Shelves, Shopper Trade-Down appeared first on PYMNTS.com.