Rite Aid Announces Corporate Staff Reduction, Realignment of Its West Coast Distribution Network

Business Wire, Sept 24, 1999

CAMP HILL, Pa.--(BUSINESS WIRE)--Sept. 24, 1999--

Rite Aid Corporation (NYSE, PSE:RAD), today announced a corporate downsizing to reduce overhead expenses.

Approximately 330 corporate and field staff support positions, with approximately half located in the greater Harrisburg, Pennsylvania area, are being eliminated with most effective today.

No direct store personnel or personnel at the Company's PCS Health Systems subsidiary are included as part of this downsizing. Annual pretax savings from the downsizing are estimated at $31.5 million pre-tax ($20 million after-tax).

The Company will offer severance packages and outplacement support to displaced employees. Rite Aid currently has about 85,000 employees across the chain, of which 2,000 are in corporate staff functions.

Martin Grass, chairman and chief executive officer, said, "The chain drugstore industry is extremely competitive and we must constantly seek to improve our cost structure. Our staff overhead expenses have started to grow at a rate faster than our business can support. While we would prefer to not dislocate these fine hard-working employees, these cuts are necessary to make us more competitive and to help reenergize our financial growth. Rite Aid is narrowing its corporate focus and adopting an execution-based strategy aimed squarely at maximizing the performance of our store assets and drugstore infrastructure and improving our return on capital."

Grass added, "None of these cuts will impede our ability to continue to offer excellent customer service in our stores, nor our pharmacists' ability to provide patients with prompt, professional care."

In a separate action, the Company yesterday told employees of its Ogden, Utah distribution center that it plans to close the center in mid-2000 as part of a realignment of its West Coast distribution network.

Starting next March, operations at the Ogden center, which employs approximately 500 people and serves 450 stores, will be transferred to a new, state-of-the-art, one million square foot distribution facility now being built in Lancaster, California.

The Lancaster facility, due to open in early 2000, is nearly twice the size of Ogden, can serve up to 1,000 stores and is centrally located to the majority of Rite Aid's West Coast stores. When Lancaster is fully operational, annual savings are estimated to be $45 million pretax.

The company will book combined pretax charges, as yet undetermined, in the third quarter for severance, asset disposition costs and other related costs for the staff downsizing and the Ogden distribution center closing.

The Company continues to be involved in discussions involving possible corporate transactions that, if consummated, would be material. There can be no assurance as to the outcome of the discussions.

Rite Aid will release second quarter results after market-close on October 11, 1999. The Company will also release its financial outlook for the rest of fiscal 2000 and fiscal 2001 on October 11.

Rite Aid is one of the nation's leading drugstore chains with annual revenues of nearly $13 billion and approximately 3,800 stores in 30 states and the District of Columbia. Rite aid owns PCS Health Systems, Inc., which provides pharmacy benefit management programs and services that can help improve patient health and reduce health care costs.

Rite Aid also owns approximately 22% of drugstore.com, a leading online source for health, beauty and pharmacy products. General information about Rite Aid, including corporate background and press releases, can be found at the company's Web site at www.RITEAID.com.

This press release contains forward-looking statements, which are subject to certain risks, and uncertainties that could cause actual results to differ materially from those expressed or implied in the forward-looking statements.

Factors that could cause actual results to differ materially from those expressed or implied in such forward-looking statements include final audit adjustments, as well as the other factors that typically could cause the company's results to differ from those expressed or implied in forward-looking statements.

Additional factors could include competitive pricing pressures, third party prescription reimbursement levels, continued consolidation of the drugstore industry, consumer preferences, regulatory changes governing pharmacy practices, general economic conditions, inflation, merchandise supply constraints, interest rate movements, access to capital, availability of real estate, construction and start-up of drugstore and distribution center facilities, and the effects of technological difficulties including remediation of year 2000 compliance issues.

Consequently, all of the forward-looking statements made in this press release are qualified by these and other factors, risks and uncertainties. Readers are also directed to consider other risks and uncertainties discussed in documents filed by the company with the Securities and Exchange Commission.