By Ted Gavin, CTP, NCPM, Managing Director & Founding Partner

Last week, Rite Aid emerged from bankruptcy with a fresh start—less debt, fewer stores, and a court-approved plan dubbed “Rite Aid 2.0.” This move was meant to mark a significant turning point towards financial stability. But I keep thinking: has anything fundamentally changed for Rite Aid, or is this just more of the same?

When looking at restructuring businesses out of bankruptcy, I’m always looking at three core questions:

1. Is the business viable? For a business to be truly viable, it must possess the fundamentals that ensure cash generation and profitability. These are not interchangeable:

• Cash Generation: the ability to consistently generate enough cash flow to cover operating expenses and invest in growth.

• Profitability: the ability to generate profit margins that sustain the business over the long term.

Despite the restructuring, I have skepticism regarding Rite Aid’s capacity to improve its fundamentals. The retail sector is notoriously challenging, especially with competitors like CVS and Walgreens dominating the space, not to mention even larger players like Walmart and Amazon. Without clear differentiation and a robust strategy to compete, Rite Aid risks falling back into financial distress — the same tired old brand with a new balance sheet, for now.

2. Do you have the management talent to lead the business? A viable business is only as strong as its leadership. The second critical component is whether a company has the management talent to steer the company toward success. Strong leadership is essential for executing a turnaround strategy effectively:

• Visionary Leadership: leaders who set a clear strategic direction and inspire their teams.

• Operational Expertise: managers who understand the intricacies of the retail pharmacy sector and optimize operations for efficiency and customer satisfaction.

Rite Aid’s future hinges on whether it has the right mix of leadership capabilities to drive the necessary changes. But unless there is a viable underlying business, even the best executives won’t be able to help. There is no shortage of executives who know how to manage a large retail pharmacy chain. The number that can manage the 7th-largest retail pharmacy chain and not manage to turn it into the 12th largest, however, is another matter.

3. Do you have the financing required to execute the plan? The third pivotal factor is access to financial resources. Even a viable business with excellent management will falter if it lacks the necessary cash to execute its strategy:

Capital for Investment: Funds needed to invest in technology, infrastructure, and marketing.

Working Capital: Adequate liquidity to manage day-to-day operations without financial strain.

While Rite Aid has made strides in exiting bankruptcy, significant uncertainties remain. The retail sector continues to be fiercely competitive, and without clear differentiation and robust strategic execution, the risk of reverting to old patterns is high. And I keep coming back to my first question: is there a strong underlying business here? I remain skeptical. The market dominators do a lot more than just retail drugstore business — they have broad fulfillment programs, command a large-enough share of the market to dictate terms, and can gain economies of scale. But when you’re not in the front of the ranks, the view gets a little more bleak and options are fewer. This is Rite Aid’s challenge — will they be a phoenix rising from the ashes, or an also-ran waiting for a chapter 22?