Rite Aid on Friday announced that the New York Stock Exchange has notified the company that it is no longer in compliance with NYSE continued listing standard rules because the per share trading price of its common stock has fallen below the NYSE's share price rule. The exchange requires the average closing price of listed common stock to be at least $1 per share over a 30 trading-day period, according to a Rite Aid press release.
The company Thursday received written notification of the non-compliance, and now has six months from then to regain compliance. During this period, Rite Aid's common stock will be listed and traded as usual. The retailer is in compliance with all other NYSE listing standards, according to the release.
Rite Aid is working on getting back to compliance, and actions could include a reverse stock split, subject to stockholder approval no later than at Rite Aid's next annual meeting, if necessary, the company said.
Rite Aid has been left to pick up the pieces after two merger plans failed in recent years — one with rival Walgreens that fell through in 2017 on antitrust objections and another with grocery chain Albertsons that was rejected by shareholders last year.
"The difficulties for Rite Aid really set in after the failed merger with Walgreens. When it subsequently sold a lot of its stores to Walgreens as an alternative to a merger, it turned itself into a much smaller entity," GlobalData Retail Managing Director Neil Saunders told Retail Dive in an email. "This was punishing on economies of scale, especially for a company that already struggled to turn a profit even before interest payments. A potential solution to this was [the] merger with Albertsons, which also came to nothing."
Some analysts see yet another merger as the best way to recover. (The chain in previous years was seen as potentially attractive to Amazon, which is eyeing moves to break into pharmacy operations.) But that will be difficult, according to Saunders.
"Rite Aid is now in a very tough position," he said. "It is a relatively small player in a market that is consolidating and is being dominated by big players which are capitally rich. This gives it little room for creativity which limits its growth. Ideally it needs to find another partner to merge with or be acquired by. However, finding one is something of a challenge."
Under NYSE rules, Rite Aid can regain compliance during a six-month "cure period," which will address its immediate problem on Wall Street, but the drugstore retailer still has issues to fix, including the state of its retail stores, which are much fewer in number since Walgreens took over many of them after the failed merger. Like rivals, the retailer has improved its beauty offering to take advantage of the strength of that market, but its front-of-store retail (also like rivals) is generally unappealing. Its losses narrowed in its most recent quarter, and its pharmacy benefit management unit EnvisionRx, acquired four years ago, is seen as its most valuable asset.
"I am sure that Rite Aid can overcome its stock listing problems in the short term," Saunders said. "However, there are a lot of underlying issues which need to be solved over the medium to longer terms and these will prove to be much more challenging."