Standley returns to Rite Aid as COO in executive shakeup

10/6/2008

CAMP HILL, Pa .—One of the original engineers of Rite Aid’s turnaround earlier this decade has returned to Camp Hill. Rite Aid named John Standley president and chief operating officer on Sept. 25—the same day Rite Aid readjusted earnings guidances to reflect the impact of a recession economy.

Standley left Rite Aid in 2005 to become chief executive officer at Pathmark, where he engineered and led the successful turnaround and eventual sale of the grocer to A&P in spring 2007.

In the six years he was at Rite Aid, Standley oversaw the implementation of new financial controls and was integrally involved in the development of the company’s current information systems, real estate strategy and compliance programs.

“John spearheaded a remarkable success story at Pathmark; and while at Rite Aid earlier this decade, he was a key member of the team that helped turn around our operating results,” stated Mary Sammons, Rite Aid chairman and chief executive officer. “I am confident that he is ready to hit the ground running,”

Standley, who has served in an advisory capacity to Rite Aid over the past several months, assumes the chief operating officer reins from Robert Easley and the president title from Sammons.

“Rite Aid has a tremendous amount of opportunity in front of it,” Standley said. “I really see a lot of success for us in the future.”

With Standley, Rite Aid named Frank Vitrano chief financial officer and chief administrative officer, replacing Kevin Twomey, executive vice president and chief financial officer, and Pierre Legault, chief administrative officer, who have reportedly left the company to pursue other interests.

Vitrano, also from Pathmark, served as that company’s president, chief financial officer and treasurer. “We are combining the positions of chief financial officer and chief administrative officer in order to help us further improve operational efficiency,” Sammons told analysts “John and Frank both will report to me and bring Rite Aid an optimal blend of financial, operational and turnaround experience that our company needs at this juncture.”

In another move, Rite Aid moved its pharmacy operations responsibilities to executive vice president of store operations Brian Fiala. “[This] will lead to more cohesive management and better performance in the stores,” Sammons added.

Both Wall Street analysts and vendors viewed the executive makeover as a net positive. “John Standley [is] well-respected [across Wall Street], knows the business and obviously did a good job selling Pathmark,” said Jay Carlington, analyst at Credit Suisse.

The change in operational and financial direction comes at a crucial juncture for the No. 3 drug chain. While the Brooks/Eckerd acquisition is complete and sales across those stores are trending up, the reality of a declining economy has forced Rite Aid to readjust earnings guidance. The chain now expects net losses to fall in the range of $445 million and $535 million, compared with previous guidance of a net loss between $260 million and $375 million.

Rite Aid revised its fiscal 2009 guidance based on a number of factors, including current sales trends, a longer-than-expected turnaround of Brooks/Eckerd pharmacy sales, forecasts for continued weakness in the economy and the closing of underper-forming stores.

For the year, sales now are expected to fall between $26 billion and $26.5 billion in fiscal 2009, from a guidance range of $26.7 billion and $27.2 billion stated previously. New same-store sales guidance is expected to improve 1.5 percent to 3 percent over fiscal 2008, compared with a previous guidance of 2 percent to 4 percent. Adjusted EBITDA now is expected to be between $950 million and $1.025 billion, compared with previous guidance of between $1 billion and $1.1 billion.

“With the integration of Brooks/ Eckerd behind us and same-store sales in the acquired stores continuing to trend upward, the key task before us is to drive profitable growth,” Sammons said.

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