Talk of Store Sell-Off Lifts Rite Aid Stock

Rite Aid Corp. stock rose 17% Wednesday amid speculation that the nation’s third-largest pharmacy chain is about to sell off some of its poor-performing stores or, in a less likely scenario, merge with a bigger company.

Shares of Rite Aid rose $3.44 to close at $22.88 on the New York Stock Exchange.

After the market closed, the Camp Hill, Pa.-based company said it is “in discussions involving possible corporate transactions that, if consummated, would be material.” In a statement, Rite Aid also said it postponed next Thursday’s meeting with analysts to Sept. 22; analysts expect an announcement about a partial sale to come out of the newly scheduled meeting.

Rite Aid is likely to sell 250 to 350 of its West Coast stores, mostly in the Pacific Northwest, which it acquired with its purchase of Thrifty Payless in 1997, said analyst Eric Bussard of Midwest Research in Cleveland. Those stores are considerably larger than others in the chain, analysts said, and have been poor performers.

A partial sale is not expected to involve stores in Southern California, but could include some larger Bay Area stores that were a holdover from the Payless chain. The list of possible buyers includes Albertson’s Inc., which owns the Sav-on chain, and Walnut Creek-based Longs Drug Stores Corp., which operates a larger-format store.

“Strategically, it’s a good move--but that depends on the price,” said Meredith Adler, an analyst with Lehman Bros. in New York. “Does it solve all of their problems? No. But I believe the other problems are solvable over time.”

Some company watchers also speculate that the chain is a possible acquisition target for Wal-Mart Stores Inc., Sears, Roebuck & Co., Safeway Inc. or Kroger Co.

Rite Aid, which had been on a buying spree until its earnings started to lag this year, has more than 3,800 stores in 30 states.

In June, the company restated earnings downward for its fiscal year ended Feb. 27, decreasing net income to $143.7 million from $158 million. The revisions reflected how the company accounted for expenses related to recent acquisitions, store openings and the closing of smaller stores and distribution centers.