Rite Aid stock tanks to multi-year low after new CEO takes the helm

Drugstore chain Rite Aid’s (NYSE: RAD) shares experienced a negative trend after the company appointed Heyward Donigan as its CEO on August 12, Monday. Rite Aid stock, which closed at $7.19 last Friday, has been continuously declining and it tumbled to a multi-year low ($5.29) in today’s regular trading session. The stock had dropped 25% so far from Friday’s closing price.

On Monday, Rite Aid named Heyward Donigan as CEO with immediate effect. As planned, John Standley stepped down from his role. Most recently, Donigan served as the CEO of Sapphire Digital, which designs and develops omnichannel platforms that help consumers choose their best fit healthcare providers. Since 2015, Donigan led Sapphire Digital’s strategy and operations to record growth and consumer engagement.

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The Camp Hill, Pennsylvania-based firm also announced that Ms. Donigan will be granted an employment inducement award, consisting of a restricted stock award with a grant date fair value equal to $2 million and non-qualified stock options with a grant date fair value equal to $2 million.

Related: Rite Aid (RAD) stock plunges to a 9-year low

“Today’s announcement is an important step in positioning Rite Aid for the future, and we are confident that Heyward is the right person to lead the company in capitalizing on the opportunities in the evolving healthcare environment,” said Bruce Bodaken, Rite Aid’s Chairman.

When Rite Aid reported its first quarter 2020 results in June, its bottom line and top-line results missed consensus estimates and the stock slipped 10% immediately after the earnings announcement. Rite Aid’s loss expanded in the recently ended quarter on flat revenue.

Then CEO John Standley stated that first quarter results did not meet the company’s views due to prescription reimbursement rate pressure in the Retail Pharmacy segment and margin compression in the Pharmacy Services segment.

The troubled pharmacy operator has been struggling for a long time. The margins have been under pressure from the high costs and muted sales growth. Rite Aid is also hurt by competition from online pharmacy retailers.

The operational crisis and a couple of failed merger deals had kept the company in the negative zone for more than two years. Rite Aid stock, which dropped 7.75% to $5.36 today, had slumped 62% so far this year and 80% in the past 12 months. Winning investors’ confidence is going to be a herculean task for the new CEO Heyward Donigan.

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