August 12, 2019 / 11:44 AM / 3 months ago

UPDATE 2-Rite Aid taps healthcare executive as its new CEO

(Adds analyst comment, share movement)

Aug 12 (Reuters) - Rite Aid Corp on Monday named Heyward Donigan as chief executive officer, hoping to use her expertise in managing healthcare companies to stem sales declines at the drugstore chain due to intense competition.

Brick-and-mortar drug retailers have been hit as Americans are increasingly relying on online retailers such as to buy over-the-counter treatments and as more customers purchase low-cost generic drugs.

Last week, Walgreens Boots Alliance Inc said it plans to close about 200 stores in the United States as part of its cost management program aimed at mitigating the pressure related to generic drug prices.

Rite Aid sold more than 1,900 stores to Walgreens in 2018.

"Today's announcement is another illustration of the challenges that retail pharmacy is facing as Rite Aid has moved from a CEO with a retail background to one with experience in managed care/providers," Evercore ISI analyst Ross Muken said.

Donigan, who most recently served as CEO at Sapphire Digital, a website that analyzes health-care plans, will succeed John Standley, who has led the company since 2010.

She has also held executive roles at Cigna Corp, General Electric Co and U.S. Healthcare.

Muken expects Donigan to consider partnerships with other healthcare companies as the drugstore chain works to combat declining front-end sales and lower pharmacy profitability.

Shares of Rite Aid, which have fallen 49% so far this year, were up 1.7% at $7.31 before the bell.

"While investors may be temporarily encouraged by new management and its future plans, we are skeptical that much can be done besides putting off the day of reckoning," Muken added in a note.

Rite Aid in March announced a restructuring plan, including a change in leadership and a reduction of 400 corporate positions, aimed at saving about $55 million annually.

Last year, the company saw its $24 billion merger with U.S. grocer Albertsons Companies Inc fall through after its shareholders opposed the deal.

Reporting by Saumya Sibi Joseph in Bengaluru; Editing by Shinjini Ganguli

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