Rite Aid Ushers In New Look At Ex-Payless Stores Drugstore Giant Restores Focus On Pharmacy, Cuts Back On Amount Of General Merchandise

PayLess, which grew from a single drugstore in La Grande in 1939 to become part of the West’s biggest pharmacy chain, is about to disappear like a dissolving aspirin.

PayLess store signs began coming down this month, marking the end of an era for a brand familiar to many Northwest residents. By the end of March, more than 1,000 former PayLess and Thrifty stores will carry the Rite Aid name.

The new name will be the most visible in a series of changes since Rite Aid Corp. of Camp Hill, Pa., bought Thrifty PayLess Holdings Inc. in December 1996.

Rite Aid executives said sales at Thrifty PayLess stores declined 5 percent last year. The company quickly started trying to reverse that trend.

Since the acquisition, Rite Aid has put nearly 850 of its more than 1,000 branded products into the West Coast stores and hooked the pharmacies into Rite Aid’s interactive computer system. It also has sold Thrifty PayLess’ sprawling Wilsonville headquarters and warehouse complex.

As the transition began, Rite Aid expected to save about $65 million during the first full year of operation through lower administrative and overhead costs and more efficient purchasing.

“We’re right on target,” Martin L. Grass, Rite Aid chairman and chief executive officer, said.

For customers, the most noticeable changes will come during the next three years as Rite Aid remodels or relocates most of the Thrifty and PayLess stores as part of an effort to boost its West Coast market share. But the Pennsylvania company already has made significant moves affecting employees and community organizations.

Analysts generally rate the acquisition as a success for Rite Aid but acknowledge some difficulties in merging companies with two different cultures.

“Rite Aid is a more disciplined company than Thrifty PayLess was,” said Meredith Adler, an analyst with Lehman Brothers. It pays more attention to expense control, she said, but will be challenged in dealing with the West Coast company’s larger stores.

Rite Aid’s new and remodeled stores will be smaller and carry less general merchandise than the Thrifty and PayLess outlets. The pharmacy will be the centerpiece of remodeled stores. Traditional drugstore product lines such as health and beauty aids also will be emphasized, at the expense of some general merchandise.

There were seven PayLess stores in Spokane and another in Coeur d’Alene that will now carry the Rite Aid name.

Rite Aid offers prescription refill service over the Internet, drive-through windows at some stores and a 24-hour hot line for advice on medicines and side effects.

The transition apparently has been more painful for some employees than for most customers. In addition to those who lost their jobs because of the Thrifty Payless’ headquarters closure in December, some have left the new company because they were unhappy.

Details are elusive because Rite Aid employees are instructed not to speak to the news media. One pharmacist, however, said she left Rite Aid in September and took a similar job with Safeway because of the long hours and amount of work she faced at Rite Aid.

“It became all dollars and cents,” she said.

Grass acknowledged that not all Thrifty PayLess workers embraced Rite Aid’s methods.

“Whenever you have a transition, a small number (of employees) have difficulty with it,” he said. He acknowledged that Rite Aid probably is more demanding of its employees and places more emphasis on management systems and technology than Thrifty PayLess.

Rite Aid’s decision not to continue the Thrifty PayLess Celebrity Golf Classic also sparked protests, but the company says it’s committed to charity and will select other events and activities on the West Coast to support.

Like other leaders in the drugstore industry, Rite Aid continues to prowl for acquisitions. In August, Rite Aid bought two smaller drugstore chains, Harco Inc. and K&B Inc., adding 332 more stores.

These acquisitions and the Thrifty PayLess deal have given a big boost to Rite Aid’s revenues and profits.

The company said that during its third fiscal quarter, which ended Nov. 29, net income rose 81 percent to $67.89 million, or 54 cents a share, up from $37.41 million, or 45 cents a share, a year earlier.

Rite Aid’s growth from huge to huger last year probably was a good thing, said Lehman Brothers’ Adler. She said the acquisitions “make a lot of sense for Rite Aid because this is an industry that needs to consolidate to maintain profitability.”

“I like Rite Aid stock. I’ve got a strong buy on it,” she said. “They have a lot of work to do, but the Thrifty PayLess acquisition positions them well for the future.”