Summary
- Rite Aid has cleaned house in the executive suite, sending its CEO, CFO, and COO packing.
- The news drove RAD shares higher in aftermarket trading.
- That said, investors still need to be cautious: this is a declining, leveraged business in a secularly challenged industry.
- Below $1, there's hope - but the bull case seems to rest on two key pillars at this point.
Many Rite Aid (RAD) shareholders finally got what they wanted. CEO John Standley is leaving. On Tuesday evening, the company announced a wholesale shakeup of its top executives: Stankey will depart when his successor is named, while President and COO Kermit Crawford and CFO Darren Karst have been replaced. Other managers and executives are being relieved of their duties as well, with the company eliminating "approximately 400" positions.
Many RAD shareholders are celebrating (see the comments here), and the stock did rise 12% in after-hours trading Tuesday. It's certainly difficult to see Standley's departure as a negative, given that in barely two years RAD has gone from a $9 per share takeover offer from Walgreens Boots Alliance (WBA) to trading at well under $1 per share, even after the postmarket gains. As many shareholders see it (and with some justification), Standley has made millions while losing the original Walgreens deal (after an 18-month FTC review process), entering into an aborted transaction with grocer Albertsons, and watching his company's profits dwindle.
The enthusiasm for new management - any new management - does make some sense. But the long decline in RAD stock isn't just a matter of management missteps. There are very real challenges facing the industry - challenges to which even Rite Aid's larger rivals haven't proven immune. Looking forward, there's still an enormous amount of risk when it comes to RAD - and a very real chance of a restructuring. RAD is tempting here, and there's a path out. But I'd caution investors to remember that just because a new CEO is on the way, that doesn't necessarily mean that Rite Aid can find that new path - or recover from the mistakes made on its old one.
