Rite Aid under pressure to unload West Coast ops

Longueuil, Quebec Rite Aid may be under pressure to unload its West Coast operations from its largest shareholder the Jean Coutu Group, according to a Bloomberg report.

Rite Aid, which has lost money for nine straight quarters, must gain market share in places like Pennsylvania and New York, where it is already a leader, to bolster earnings, said CEO Francois Jean Coutu of Jean Coutu Group Inc. Rite Aid said it doesn’t plan to sell western stores.

“If there are no drastic changes in the drug-distribution market in the U.S., Rite Aid is going to have choices to make,” Coutu said. “I think it would probably be better for Rite Aid to focus its energy and strengths on a few markets.”

Rite Aid operates more than 4,800 stores, including locations in Utah, Idaho, Washington and other western states. Coutu didn’t say which of the stores could be sold or when the retailer would be profitable.

“We have no plans to sell our West Coast stores. Our plan is to remain a nationwide drug store company,” a Rite Aid spokeswoman told Bloomberg. “We would have to evaluate any proposal that came to us that made financial sense and delivered value for our shareholders.”

Jean Coutu, Canada’s second-largest drug store chain, sold more than 1,800 Brooks Eckerd stores to Rite Aid in 2007. As part of the agreement, Jean Coutu was given Rite Aid board seats and 250 million shares, making it the U.S. company’s largest common shareholder. Jean Coutu held a 28.4% equity interest in Rite Aid, according to its fiscal 2009 annual report.

The suggestion that Rite Aid may be working toward unloading its West Coast operations is not new. Even before Rite Aid’s acquisition of Brooks/Eckerd, analysts and industry experts speculated that Rite Aid may one day look to sell its West Coast stores in an effort to solidify its operation along the East Coast.