WILL RITE AID NEED TUMS?

Implications: Rite Aid, the no. 3 drug chain behind Walgreens and CVS, is buying 1,521 Eckerd stores and 337 Brooks stores.

Rite Aid already has had serious problems making money from the stores they have owned and operated for many years.  Any industry veteran can attest to the difficulty of making money with stores that must be converted to new systems, new management, new procedures and new distribution models.

This article is subtitled "Rite Aids' deal is good news for net lease investors."  I respectfully disagree.

Analysis: Walgreens has grown almost entirely through internal and steady store expansion.  CVS has grown partly through internal expansion and partly through acquisition.  When CVS did resort to acquisition, they did so in manageable bites.  Even then this well run powerhouse has had mild indigestion and profit problems after each sizable acquisition.

The author of this article seems to ignore the likelihood of Rite Aid having serious indigestion problems when trying to digest a group of stores over half it's current size.  If this were a 50% expansion of fully integrated Rite Aid stores that were Rite sized, Rite planned, and Rite merchandized, I would anticipate serious gas pains.  The fact that not one of these 1858 stores fits into the Rite Aid pattern guarantees a gigantic case of indigestion!

This acquisition brings new meaning to the phrase "biting off more than you can chew". I'm glad that Rite Aids warehouses have a good supply of Tums on hand. They will need it.

It should also be noted by all these "net lease investors" that the article believes will benefit from this acquisition. They too will be in need of some additional supply of Tums. Maybe the real beneficiaries of this acquisition will be the makers of Tums.